In which scenario would the auditor gather additional evidence?

Gathering additional evidence is essential in situations where there is a significant risk of misstatement. This occurs because the auditor must ensure the reliability of the financial statements and assess the likelihood of errors or fraud that could impact the overall financial position of an entity. If the risk is assessed as high—perhaps due to complex transactions, unusual events, or a history of issues—the standard procedures may not provide sufficient assurance. Thus, obtaining more evidence through tests and corroborating information is crucial to form a well-supported opinion on the financial statements.

In other scenarios, such as when internal controls are very strong or financial statements are clear, auditors can usually rely on these positive factors to reduce the amount of additional evidence needed. Strong internal controls typically mean that risks of misstatement are lower, while clear financial statements suggest that the information presented is accurate and straightforward, minimizing the need for further investigation. Similarly, an optimistic audit report does not inherently signal a need for extensive additional evidence, unless it is coupled with significant risks or unusual circumstances affecting financial reporting. This highlights the importance of risk assessment in determining the extent of evidence required during the audit process.