An Auditor Has Been Assigned to Perform Tests of Controls

question 41

Multiple Choice

An auditor has been assigned to perform tests of controls for a client's cash disbursement system. Client files are kept electronically with no paper audit trail. In this case the auditor would need to rely on which of the following audit procedures?

• A) Analytical procedures and Inquiry
• B) Confirmations and Inquiry
• C) Observation and Inquiry
• D) Reperformance and Inquiry

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Definitions:

Accumulated Depreciation

The cumulative depreciation expense recorded for an asset from the time it was first utilized.

Artificial Time Periods

A concept in accounting referring to arbitrary time intervals chosen for the purpose of financial reporting, such as quarters or fiscal years.

Cash Basis Accounting

An accounting method where revenues and expenses are recognized when cash is received or paid, rather than when earned or incurred.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from revenue.