Question

An important primary purpose of the auditor's review of the entity's procurement system should be to determine the effectiveness of the activities to protect against?

1) Improper materials handling
2) Unauthorized persons issuing purchase orders
3) Mispostings of purchase returns
4) Excessive shrinkage or spoilage

Answer 1

The auditor's review of the entity's procurement system is to determine the effectiveness of protecting against various risk factors.

Step-by-step explanation:

The primary purpose of the auditor's review of the entity's procurement system is to determine the effectiveness of the activities in protecting against various risks, including improper materials handling, unauthorized persons issuing purchase orders, mispostings of purchase returns, and excessive shrinkage or spoilage.

For example, the auditor may review the system's controls and procedures to assess whether there are adequate safeguards in place to prevent improper handling of materials, such as inventory items being damaged or lost.

Additionally, the auditor may examine the authorization procedures for purchase orders to ensure that only authorized personnel are allowed to issue them and prevent any potential fraud or errors.