Part 5 Appropriateness of Audit Evidence (20 points) 1. Define Discuss what is meant by RELEVANCE. Na a aa a a a For each situation presented below, indicate which means of gathering evidence would be considered more reliable AND indicate a reason from the following list: A. Independent source of the information (Independence of provider); B. Auditor's direct knowledge; C. Knowledgeable source (qualifications of individuals providing the information); D. Degree of objectivity versus subjectivity; and E. Functioning system of internal controls. CHOOSE ONLY ONE LETTER. DO NOT DISCUSS your answer. READ CAREFULLY. 1 Answers Item Number more reliable Letter for reason ? ? b. ? [ e b. a. In testing assets, (1) the auditor verifies the cost of additions to the "land" account, or (2) the auditor considers the adequacy of the "allowance for doubtful accounts". 1. The auditor relies on an analysis prepared by the controller of gross margin to sales for the current and priore periods; or (2) The auditor calculates gross margin to sales and compares to similar data for prior periods. C. As a test of accounts receivable, (1) the auditor reviews a confirmation received directly from the customer of the company being audited, or 2. The auditor asks the controller if the amounts are correct. d. Auditor tests two segments of the company. 1. In the first segment, employees check each other's work; 2. In the seconde segment, no one checks the work