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CS Professional · Internal and Forensic Audit · Internal Audit Tools and Techniques

An internal auditor at Bharat Pharma Ltd uses a test data technique. She prepares dummy transactions, including a purchase order above the approval limit, and processes them through the live purchase system to see whether the system rejects or flags them. What is the main purpose of this technique?

The purpose is to test whether application controls, such as approval limit checks, operate as designed. Dummy valid and invalid transactions are processed and the outputs compared with expected results, showing whether the program accepts or rejects them correctly.

  1. ATo test whether application controls operate as designed in the programCorrect
  2. BTo confirm the physical existence of inventory
  3. CTo select a statistical sample of vendors
  4. DTo reconcile bank balances with the ledger

Explanation

Test data feeds valid and invalid transactions into the system to observe whether programmed controls such as approval limit checks work. It does not verify physical stock, sampling or bank reconciliation, which are different procedures.

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