ExpertHard1 markMultiple Choice
CPA · Question 42 · Area III: Procedures
An auditor is testing the operating effectiveness of a control that leaves no documentary evidence (e.g., the controller's review of the budget vs. actual report). Which audit procedure is MOST appropriate?
An auditor is testing the operating effectiveness of a control that leaves no documentary evidence (e.g., the controller's review of the budget vs. actual report). Which audit procedure is MOST appropriate?
Answer options:
A.
Reperformance.
B.
Inspection of documents.
C.
Inquiry and Observation.
D.
Confirmation.
How to approach this question
Match procedure to control type. No paper trail = Inquiry/Observation.
Full Answer
C.Inquiry and Observation.✓ Correct
Inquiry and Observation.
For controls that do not leave a documentary trail (like a mental review or a meeting), the auditor typically relies on Inquiry (asking the controller) and Observation (watching the review process happen) to obtain evidence of operating effectiveness.
Common mistakes
Selecting Inspection when the prompt says 'no documentary evidence'.
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