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CMA Intermediate · Corporate Accounting and Auditing · Report on Internal Financial Control over Financial Reporting

Which of the following statements about inquiry as a procedure for testing the operating effectiveness of controls is correct?

Inquiry must be combined with other procedures such as observation, inspection or re-performance. By itself it relies only on what management says and cannot support a conclusion that a control operated effectively throughout the period, so it is weaker evidence than re-performance.

  1. AInquiry alone is sufficient to conclude that a control operated effectively throughout the year
  2. BInquiry is never allowed in an audit of internal financial controls
  3. CInquiry should be combined with other procedures such as observation, inspection or re-performance to obtain sufficient evidenceCorrect
  4. DInquiry is stronger evidence than re-performance

Explanation

Inquiry gives the weakest evidence on its own because it relies on management's statements. The auditor must corroborate it by observation, inspection of documents or re-performance. Hence only the combination option is correct.

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