Audit and Assurance Practice Exam

True or False: Purchase orders, being external documents, have higher reliability than requisitions.

1. True

2. False

3. Only if verified

4. Depends on the auditor

The correct answer is: True

When considering the reliability of documents in the context of an audit, purchase orders are indeed viewed as external documents, whereas requisitions are typically internal documents. The reason purchase orders are regarded as having higher reliability lies in their nature and the processes surrounding them. Purchase orders originate from requests made to external suppliers, which means they are subject to a greater level of scrutiny and verification by parties outside the organization. This increased level of scrutiny often results in purchase orders containing accurate, validated information, because they are confirmed with external entities, making them reliable sources of evidence for transactions. The fact that they are part of a formal process that involves negotiation and agreement with a vendor further enhances their reliability. In contrast, requisitions are initiated internally and may not undergo the same rigorous external verification process. They rely on internal control systems, which, while important, are subject to the risks associated with internal processing, such as errors or miscommunication. Thus, it is justifiable to state that purchase orders, by virtue of being external documents validated through agreements with third parties, possess a higher level of reliability compared to requisitions.