Skip to content

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

While reviewing the dispatch section of Bharat Cables Ltd, an internal auditor stands in the loading bay on three unannounced days and watches how gate passes are checked against delivery challans. What is a key limitation of this evidence?

The main limitation of observation is that it proves the control operated only at the moment it was watched, since staff may act differently otherwise. The auditor therefore corroborates it with other evidence such as documents or re-performance. It is still valid for testing controls.

  1. AIt shows the control operating only at the time of observationCorrect
  2. BIt is always less reliable than inquiry
  3. CIt cannot be used for control testing
  4. DIt provides evidence about ownership of goods

Explanation

Observation shows how a control works when the auditor is watching, but staff may behave differently at other times. Hence it is usually corroborated with other evidence. It is valid for control testing and is generally more reliable than mere inquiry. It does not establish ownership.

Did you get it right without looking?

One question tells you little. A timed set on Internal Audit Tools and Techniques shows your real accuracy, how long you take and where you lose marks.

Practise Internal Audit Tools and TechniquesFree diagnostic mock

More Internal Audit Tools and Techniques questions