Exam IIA-CIA-Part2 topic 2 question 49 discussion

Actual exam question from IIA's IIA-CIA-Part2

Question #: 49
Topic #: 2

An internal auditor found that the cost of some material installed on capital projects had been transferred to the inventory account because the capital budget had been exceeded. Which of the following would be an appropriate technique for the auditor to use to determine the extent of the problem?

A. Identify variances between amounts capitalized each month and the capital budget.
B. Analyze a sample of capital transactions each quarter to detect instances in which installed material was transferred to inventory.
C. Review all journal entries that transferred costs from capital to inventory accounts.
D. Compare inventory receipts with debits to the inventory account and investigate discrepancies.

Show Suggested Answer

Suggested Answer: C 🗳️

by whatup at June 11, 2020, 6:19 p.m.

Comments

Submit Cancel

whatup

1 year, 2 months ago

why would you review all transactions and not a sample ? reviewing all transactions is not efficient

upvoted 1 times

Prossyn

3 months, 2 weeks ago

The question is wants "an appropriate technique for the auditor to use to determine the extent of the problem" the key words is extent, you cannot determine the extent by sampling, in other words they want the whole amount moved to inventory

upvoted 5 times

...

WZ

1 year, 1 month ago

Given that it is a suspected (or most likely) fradualent act, the assumption is that there might not be a lot of these entries. And secondly this is not a normal accounting entry, therefore there is no point of sampling as finding even one item is a proof of fraud. At that point it the matter of finding out if all such transactions equal the discrepency noted in the beginning.

upvoted 4 times

...

Exam IIA-CIA-Part2 All Questions

View all questions & answers for the IIA-CIA-Part2 exam

Exam IIA-CIA-Part2 topic 2 question 49 discussion

Comments

whatup

Prossyn

WZ

SY0-701