One major task for an auditor is to evaluate the reliability of testimonial evidence, which may come in the form of oral representations from management or in written form from parties outside the organization.

Required
a. In the course of an audit, the auditor asks many questions of client officers and employees. Describe the factors the auditor should consider in evaluating oral evidence provided by client officers and employees.
b. For each of the following examples of testimonial evidence, identify either
(1) An alternative source of evidence or
(2) Corroborative evidence the auditor might seek.

Examples of Testimonial Evidence:
1. Confirmations received from customers as to the balance of accounts receivable shown by the client.
2. Management is optimistic that all items in a product line will be sold at normal prices in spite of a temporary downturn in sales.
3. Management intends to hold investments in marketable securities with an intent to convert into cash within the next operating period as cash needs dictate.
4. Management tells the auditor that the Food and Drug Administration has approved its new drug for commercial sale.
5. The auditor interviews the production manager, who candidly identifies quality control problems and points out substantial pieces of inventory that should be reworked before shipment.