Which statement about audit evidence is correct?

The correct statement regarding audit evidence is that it should be sufficient and appropriate. This principle is crucial in the auditing process as it ensures that the evidence gathered is not only comprehensive enough to support the auditor's conclusions but also reliable and relevant to the assertions being tested.

Sufficiency refers to the quantity of audit evidence collected, which must be adequate to provide a reasonable basis for the auditor’s opinion. The appropriateness of audit evidence encompasses its quality, which includes its relevance and reliability. For example, firsthand evidence obtained directly by the auditor (such as observations or inquiries with clients) is often considered more reliable than evidence obtained indirectly.

Gathering adequate and appropriate evidence is essential for forming a sound audit opinion and meeting the standards set by auditing guidelines. Without sufficient and appropriate evidence, an auditor may lack the confidence needed to issue an opinion on the financial statements, potentially leading to a flawed or misleading conclusion. Therefore, this principle serves as the foundation of a successful audit.