During an Engagement the Internal Auditors Reported That the Organization

question 186

Multiple Choice

During an engagement the internal auditors reported that the organization was paying suppliers without receiving the merchandise. Management responded that it would immediately establish the use of receiving reports. As part of the follow-up activity, which of the following procedures would be the most appropriate in determining that management action was implemented?

• A) Ask management if the new policy related to the receiving reports is in place.
• B) Select a sample of receiving reports and determine if payments were made.
• C) Interview warehouse employees to ascertain adherence to new policy.
• D) Select a sample of payments and determine if a receiving report exists.

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Definitions:

Market Efficiency

A concept describing the extent to which stock prices reflect all available, relevant information, making it impossible to consistently achieve higher returns.

Semi-strong Form

A form of the Efficient Market Hypothesis that asserts all public information is reflected in the stock prices.

Market Efficiency

Market efficiency is a concept where all available information is already reflected in asset prices, implying that assets are priced perfectly and it is impossible to "beat the market" through expert stock selection or market timing.

Microsoft Stock

The shares of Microsoft Corporation, representing ownership in the company, traded on the stock market.