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CS Professional · Internal and Forensic Audit · Practices related to Internal Auditing

Internal auditors at a Gujarat chemicals company use a flowchart of the order-to-cash cycle and a questionnaire. The flowchart shows that the same clerk raises invoices, records receipts and approves write-offs, yet the questionnaire answers say duties are segregated. What is the most appropriate audit response?

The auditor should perform a walkthrough and test actual transactions to resolve the conflict, then report the segregation-of-duties weakness if confirmed. Questionnaire answers are only management's assertions and need corroboration; ignoring contradictory evidence or dropping the cycle would defeat the purpose of evaluating internal controls.

  1. APerform a walkthrough and test transactions to resolve the inconsistency, and report the segregation weakness if confirmedCorrect
  2. BAccept the questionnaire since it is signed by management
  3. CRely on the flowchart and skip all further testing
  4. DDrop the order-to-cash cycle from the audit plan

Explanation

Questionnaire responses are representations and must be corroborated. A walkthrough and testing of actual transactions establish which version is true. If one clerk really performs incompatible duties, it is a control weakness to report. Accepting the answers or dropping the area ignores contradictory evidence.

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