Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

What constitutes sufficient appropriate audit evidence?

1. Documentation of procedures performed.

2. Verification of compliance with all internal controls.

3. Assessment of the risk of material misstatement.

4. Relevant information necessary to support the audit opinion.

The correct answer is: Relevant information necessary to support the audit opinion.

Sufficient appropriate audit evidence is crucial for supporting the auditor's opinion on the financial statements. The correct choice emphasizes the need for relevant information that directly ties into the audit conclusions. This evidence must be appropriate, meaning it is both relevant and reliable, and sufficient, meaning it is enough to support the auditor's assertion regarding the financial statements. Relevant information is necessary as it pertains specifically to the transaction or account being audited and must provide insight into the accuracy and completeness of the financial reports. This includes data that validates assertions made by management, ensuring that the financial statements are free from material misstatement, whether due to fraud or error. While documentation of procedures performed and verification of compliance with internal controls are important aspects of an audit, they are more about the processes and controls in place rather than the direct evidence needed to support the auditor's opinion. Similarly, assessing the risk of material misstatement is a critical part of the audit planning and risk assessment phase but does not directly constitute audit evidence on its own. The focus on having relevant information assures that the audit opinion is grounded in solid evidence that justifies the auditor's conclusions about the fairness of the financial statements.