Final answer:
The statement that CPA audits include evidence from both internal and external sources is true. Auditors gather evidence from many sources to evaluate a company's financial statements against GAAP.
Step-by-step explanation:
The statement that audits of financial statements by a CPA include obtaining evidence from sources outside the client company as well as from internal sources is true.
When conducting an audit of a company's financial statements, a Certified Public Accountant (CPA) must gather sufficient, appropriate evidence to reach a conclusion about the fairness of the financial statements and their conformity with Generally Accepted Accounting Principles (GAAP). This process requires the auditor to collect evidence from both internal and external sources.
Internal sources may include the company's own financial records, such as ledgers, bank statements, and internal control systems. External evidence might comprise of confirmations from third parties, such as customers' accounts receivables confirmations, bank confirmations, and invoices from suppliers.
Overall, the blend of internal and external evidence provides the auditor with a broad perspective of the company's financial situation, helping to ensure a thorough and unbiased audit.