Question

A retailing entity uses the Internet to execute and record its purchase transactions. The entity's auditor recognizes that the documentation of details of transactions will be retained for only a short period of time. To compensate for this limitation, the auditor most likely would________________.

• A. Compare a sample of paid vendors' invoices to the receiving records at year-end.
• B. Plan for a large measure of tolerable misstatement in substantive tests.
• C. Perform tests several times during the year, rather than only at year-end.
• D. Increase the sample of transactions to be selected for cut-off tests.

Answer 1

The correct option is C Perform tests several times during the year, rather than only at year-end.

The auditor shall carry out the procedures in order to satisfy himself of the truthfulness of the transactions and also other factors.

In the given question, since the details of the transactions are retained by the auditee only for a short period, that would mean that the auditor shall not be able to retrieve information pertaining to the other part of the year, hence option c is valid.