Question

A walkthrough is one procedure used by an auditor as part of the internal control audit. A walkthrough requires an auditor to

A. Trace a transaction from each major class of transactions from origination through the entity's system
B. Trace a transaction from every class of transactions from origination through the entity's system.
C. Tour the organization's facilities and locations before beginning any audit work.
D. Trace a transaction from each major class of transactions from origination through the entity system until it is reflected in the entity's financial reports

Answer 1

A walkthrough in an internal control audit involves (Option d) tracing a sample transaction from each major class of transactions from its inception through the system until it is included in the entity's financial reports to assess the internal controls.

Step-by-step explanation:

A walkthrough is an important procedure used by an auditor during an internal control audit. The purpose of a walkthrough is to D. Trace a transaction from each major class of transactions from origination through the entity system until it is reflected in the entity's financial reports. This involves the auditor selecting a sample transaction from each major class of transactions and following it from its inception, through all the processes and controls, until it is finally included in the financial statements.

This method helps in evaluating the effectiveness of the entity's internal control system. It enables the auditor to gain a first-hand understanding of the process flow and to assess the design and implementation of relevant controls for preventing or detecting material misstatements in the financial reports.