Audit Evidence Has Two Primary Qualities for the Auditor; Relevance

question 112

Multiple Choice

Audit evidence has two primary qualities for the auditor; relevance and reliability. Given the choices below, which provides the auditor with the most reliable audit evidence?

• A) general ledger account balances
• B) confirmation of accounts receivable balance received from a customer
• C) internal memo explaining the issuance of a credit memo
• D) copy of month-end adjusting entries

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Definitions:

Overvalued

A term describing a security or asset priced higher than its true intrinsic value, often based on speculative demand rather than fundamentals.

Technology Bubble

A market condition characterized by the rapid inflation of technology stocks to unsustainable levels, often followed by a sharp decline.

All-Equity Firm

A company that is financed entirely by its shareholders without any debt.

Book Value

The net value of a company's assets minus its liabilities, often used to determine the company's equity value.