During an Engagement, an Internal Auditor Decided to Use Variance

question 283

Multiple Choice

During an engagement, an internal auditor decided to use variance analysis as an auditing techniques. Which of the following steps should the auditor pursue if he discovers unexpected deviations of actual results from budget?

• A) Report the deviations immediately to the audit committee.
• B) Gather additional information to determine the cause of the deviations.
• C) Conclude that the budget was unreasonably set and accept the deviations.
• D) Perform alternative forms of analytical procedures which provide no deviations.

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Definitions:

Periodic Inventory System

An inventory management system where the inventory count is conducted at specific intervals to determine the cost of goods sold.

Discount Period

The time frame in which a discount is offered for prompt payment of an invoice, encouraging early payment by customers.

Shrinkage

The loss of inventory that can occur from theft, damage, or errors in the counting or recording of stock.