Which statement relating to the competence of evidential matter is always true?

Which statement relating to the competence of evidential matter is always true?

• A. Evidential matter gathered by an auditor from outside an enterprise is reliable
• B. Accounting data developed under satisfactory conditions of internal control are more relevant than data developed under unsatisfactory conditions
• C. Oral representations made by managements are not valid
• D. Evidence gathered by auditors must be both valid and relevant to be considered competent

Answer: (D)

Competent evidential matter hinges on two qualities: relevance to the audit objective and validity (trustworthiness) of the evidence. If evidence isn’t directly related to the assertion being tested, it can’t help form a proper conclusion, and if it isn’t valid or trustworthy, it can’t be relied upon even if it’s related. Therefore, for evidence to be considered competent, it must be both valid and relevant. External evidence isn’t automatically reliable simply because it comes from outside the enterprise; its reliability depends on the source and the controls around it. Data developed under satisfactory internal control can be more reliable, but relevance isn’t determined solely by internal controls. Oral representations by management can have some value, but they are not inherently invalid and typically require corroboration.

Competent evidential matter hinges on two qualities: relevance to the audit objective and validity (trustworthiness) of the evidence. If evidence isn’t directly related to the assertion being tested, it can’t help form a proper conclusion, and if it isn’t valid or trustworthy, it can’t be relied upon even if it’s related. Therefore, for evidence to be considered competent, it must be both valid and relevant.

External evidence isn’t automatically reliable simply because it comes from outside the enterprise; its reliability depends on the source and the controls around it. Data developed under satisfactory internal control can be more reliable, but relevance isn’t determined solely by internal controls. Oral representations by management can have some value, but they are not inherently invalid and typically require corroboration.