Question

One objective of an internal auditing engagement involving the receiving function is to determine whether receiving clerks independently count incoming supplies before completing the quantity received section of the receiving report. Which of the following is the most persuasive information supporting the assertion that the counts are made?

1) The receiving section supervisor's assurance, based on personal observation, that the counts are made.
2) A receiving clerk's initials on all receiving reports attesting that the count was made.
3) Assurance, from the warehouse supervisor, that the accuracy of the perpetual inventory is the result of the reliability of the entries in the quantity received section.
4) Periodic observations by the internal auditor over the course of the engagement.

Answer 1

The most persuasive evidence that receiving clerks independently count incoming supplies is periodic observations by the internal auditor, which provide direct evidence of the process and are more reliable than second-hand assurances or document initialing.

The question you've asked pertains to the process of internal auditing in a business setting, specifically related to verifying the independent counting of incoming supplies by receiving clerks. Among the options provided, the most persuasive information supporting the assertion that counts are independently made by receiving clerks is option 4, which states: Periodic observations by the internal auditor over the course of the engagement. This method provides direct evidence of the process by relying on the auditor's personal observation rather than second-hand assurances or initialing of documents, which can be less reliable.

While the supervisor's assurance and the clerk's initials may provide some level of assurance, these could potentially be biased or falsified. The warehouse supervisor's assurance of overall inventory accuracy may suggest a good receiving process but does not directly confirm independent counts. Therefore, the internal auditor's periodic observations offer the most compelling evidence that receiving clerks are indeed counting supplies independently as part of the receiving process.