Appropriateness of audit evidence is the measure of the quality of the audit evidence that is its relevance and its reliability in providing support for the conclusion on which the auditor’s opinion is based. It is one of key characteristic of good audit evidence. The other characteristic of audit evidence is sufficiency of audit evidence. Relevance of audit evidence is determined by whether the evidence obtained help to assess the assertion presented in the financial statement.
In other words the relevance of audit evidence is when audit evidence real test the assertion it were supposed to answer. For example if you want to test existence of tangible assets the relevant test is to physically inspect it rather than just look into its purchase documents while if you want to test the ownership right to asset the relevant test is to inspect purchase documents rather than physically inspect the asset.
Reliability of audit evidence measure how strong the audit evidence is.
ISA 500 gives the guidelines of how to determine the reliability of audit evidence. The guidelines are as follows
- Audit evidence obtained from knowledgeable independent party outside the entity is more reliable than audit evidence prepared inside the entity
- Audit evidence from original documents is more reliable than audit evidence obtained from copies or facsimiles.
- Audit evidence obtained from entity with strong internal control is more reliable than evidence obtained from an entity with weaker internal control
- Audit evidence obtained directly by the auditor (for example observation of application of control) is more reliable than audit evidence obtained indirectly or by inference (for example inquiry of application of control).
- Audit evidence obtained in documentary form is more reliable than evidence obtained orally.