Question

While performing an engagement relating to an organization's cash controls, the internal auditor observed that cash deposits are not deposited intact daily. A comparison of a sample of cash receipts lists revealed that each cash receipt list equaled cash journal entry amounts but not daily bank deposits amounts, and cash receipts list totals equaled bank deposit totals in the long run. This information as support for the internal auditor's observations is

1) Sufficient but not reliable or relevant.
2) Sufficient, reliable, and relevant.
3) Not sufficient, reliable, or relevant.
4) Relevant but not sufficient or reliable

Answer 1

The information provided by the internal auditor regarding discrepancies in cash deposits and receipts is sufficient, reliable, and relevant for assessing the organization's cash controls.

Step-by-step explanation:

The student has asked about the observations made by an internal auditor regarding cash controls within an organization.

The auditor noticed that cash deposits were not being deposited intact daily, even though the cash receipts equaled cash journal entry amounts and, over time, aligned with bank deposit totals.

This information is considered Sufficient, reliable, and relevant because it is based on samples that directly correlate cash receipts with journal entries and bank deposits over time.

The sufficiency comes from the comprehensive nature of the samples taken, reliability comes from the consistency of the data over time, and relevance due to the direct connection to the organization's cash control processes being audited.