Question

When performing a substantive test of a random sample of cash disbursements, an auditor is supplied with a photocopy of vendor invoices supporting the disbursements for one particular vendor rather than the original invoices. The auditor is told that the vendor's original invoices have been misplaced. What should the auditor do in response to this situation?

Answer 1

An auditor should assess the reliability of the photocopies as evidence and may request additional evidence or perform alternative procedures. Documentation of steps taken is essential.

Step-by-step explanation:

When an auditor is supplied with a photocopy of vendor invoices to support cash disbursements instead of the original documents, they should consider the reliability of the photocopies as audit evidence. Because original invoices have been said to be misplaced, the auditor should first assess the risk of material misstatement due to fraud or error. If the photocopies are deemed inadequate, the auditor should request additional evidence, such as digital copies of the invoices from the vendor or confirmation directly from the vendor. If there is no satisfactory alternative evidence, the auditor may need to expand the sample size, perform alternative procedures or adjust the risk assessment and plan subsequent audit procedures accordingly. It is important to document all steps taken and the rationale for any conclusions.