Final answer:
Audit evidence must be sufficient, relevant, and competent, but not necessarily dispositive. Dispositive is a legal term and does not primarily pertain to the auditing process. Audit evidence should support the auditor's opinion and is similar in nature to evaluating expert testimony in legal contexts.
Step-by-step explanation:
The term 'audit evidence' refers to the information collected for reviewing a company's financial transactions, internal control practices, and other factors necessary for the certification of financial statements by an auditor. Audit evidence should be sufficient, relevant, and competent to support the auditor’s opinion. On the other hand, being 'dispositive' is not a characteristic primarily associated with audit evidence. Dispositive evidence is more a legal concept, which conclusively resolves a dispute. In contrast, audit evidence must primarily enable an auditor to make reasonable assurance about the financial statements under review.
The requirements for audit evidence can be compared to evaluating an expert's testimony. It’s crucial for the auditor to consider whether the evidence is from a trustworthy source, if it aligns with expert consensus, if it is free from bias, and if it reflects proper expertise in the field. As with testimonies in law, the competence of a witness, as discussed in various legal cases like Dusky v. United States, plays a vital role in determining the value of the evidence presented.
Moreover, audit evidence should meet the following criteria: it should be able to be tested, provide measurable results, and should preferably provide definitive answers to the questions at hand. Logical consistency, ability to correspond to fact, and coherence with other truths are vital elements of competent audit evidence.