a. Characteristics of Good Audit Evidence:

1. Sufficiency: The quantity of evidence must be adequate to support the audit opinion.
2. Appropriateness: The evidence must be relevant and reliable in relation to the audit objectives.
3. Relevance: The evidence should pertain directly to the specific assertions being tested in the financial statements.

b. Testing Procedures for Gathering Audit Evidence:

1. Inspection: Involves examining records, documents, or tangible assets to gather evidence.
2. Observation: Watching processes or procedures being performed to obtain evidence about their effectiveness.
3. Inquiry: Seeking information from knowledgeable individuals within or outside the entity to gather evidence.
4. Confirmation: Obtaining a direct response from third parties about the accuracy of information or balances.
5. Recalculation: Verifying the mathematical accuracy of documents or records to ensure correctness.
6. Analytical procedures: Evaluating and comparing financial and/or non-financial data for
   plausible relationships and investigating unexpected fluctuations.

c. Factors Considered When Assessing Reliability of Audit Evidence:

1. Source of Evidence: Evidence obtained from independent sources is generally more reliable than that obtained from the client.
2. Nature of Evidence: Physical evidence (e.g., documents, tangible assets) is typically more reliable than verbal or written statements.
3. Circumstances of Collection: Evidence gathered through direct observation is more reliable than evidence obtained indirectly.
4. Controls over Evidence: Evidence gathered in a controlled environment (e.g., under the auditor’s supervision) is more reliable.
5. Corroborative Evidence: The presence of supporting evidence from multiple sources enhances the reliability of the evidence.