Degree of correspondence with established criteria

Meaning:

• When management makes assertions (for example: "Revenue is RM5 million", "Inventory exists", "The company is solvent"), the auditor doesn’t just believe it.
• The auditor checks how closely those assertions match an objective standard, called the established criteria.

In financial statement audit:

• The established criteria are usually the applicable financial reporting framework (e.g. MFRS / IFRS).
• So the question is: “Do the financial statements comply, in all material respects, with MFRS/IFRS?”

Why it matters:

• Audit is not about guessing if numbers ‘feel right’.
• Audit gives an opinion on the degree of correspondence — in practice this becomes the audit opinion:
• “true and fair view / fair presentation” (unmodified), or
• qualified/adverse/disclaimer if the correspondence is weak or cannot be measured.

In simple terms:

It means the auditor measures how well management’s statements line up with recognised rules, and then reports that level of match to users.