What is the hierarchy of audit evidence ranked from most reliable to least?

The hierarchy of audit evidence is based on the reliability of the sources from which that evidence is obtained. The correct answer ranks the types of evidence based on their inherent trustworthiness and the likelihood that they will provide a true representation of the financial statements.

In the context of the ranking, direct knowledge is considered the most reliable because it is obtained firsthand by the auditor, minimizing the risk of miscommunication or misinterpretation that could occur with other types of evidence. This direct observation allows the auditor to assess conditions or results personally.

External evidence is ranked next in reliability. This evidence comes from a source outside of the entity being audited, such as confirmations from banks or suppliers, and is generally considered more reliable than internal documents because it is not subject to manipulation by the client's management.

Internal evidence typically carries less reliability than external evidence. This kind of evidence is generated within the organization, such as internal reports or memoranda, and can potentially be influenced or altered by management.

Oral evidence, while still useful, is considered the least reliable because it relies on spoken communication, which can lead to misunderstandings or inaccuracies. Without corresponding written documentation, the assurance provided by oral evidence is limited.

Thus, this ordering succinctly reflects the relative reliability of the evidence types in