Which category of audit evidence is considered the least reliable?

Oral evidence is considered the least reliable category of audit evidence because it lacks the formal documentation and corroboration that other forms of evidence possess. While oral evidence may provide valuable insights or confirmations from a knowledgeable person, it is inherently subject to misunderstanding, misinterpretation, or memory biases. There is no physical documentation to support oral statements, making it difficult for auditors to verify the accuracy and authenticity of the information provided.

In contrast, external evidence, which includes documents or confirmations obtained from third parties, is generally regarded as more reliable due to the independent nature of the source. Internal evidence, while also useful, can be influenced by the processes and controls of the organization being audited, thus presenting a potential risk of bias or manipulation. Direct knowledge and observation rank among the most reliable forms of evidence as they involve firsthand verification by the auditor, minimizing reliance on another party's accounts or representations. Hence, oral evidence is rightly considered the least reliable among the various categories of evidence.