Final answer:
The correct answer is option 1. The best action for an internal auditor analyzing the procurement and use of tires is to reconcile the number of tires purchased to the maintenance records. This ensures that there are no discrepancies between inventory records and actual use, directly verifying the effectiveness of internal controls.
Step-by-step explanation:
The best course of action for an internal auditor when reviewing the purchase and utilization of tires would depend on various factors such as the size of the company, the number of tires involved, and the reason for the audit. Here we are assessing the effectiveness and efficiency of the internal control system revolving around the procurement and use of tires in a company.
Option 1), determining whether the number of tires purchased can be reconciled to maintenance records, is a strong course of action. It provides a direct way of verifying if the tires purchased were actually used for their intended purpose. This method looks at the end-to-end process and helps ensure that there are no discrepancies between records and physical inventory.
Option 2), counting the number of tires on hand and tracing them to the related receiving reports, while important, is more a test of the existence and completeness of inventory rather than of the procurement process itself. However, it is still a relevant audit procedure and helps in verifying physical stocks against documentation.
Option 3), selecting a judgmental sample of requisitions and verifying that each one is signed by the fleet manager, tests the authorization control. This procedure helps to confirm that there is a control mechanism in place, specifying who has the authority to request purchases under the company policies.
Option 4), comparing the number of tires purchased under the blanket purchase order with the number of tires purchased in the prior year for reasonableness, provides a form of analytical review. While it might highlight significant variations that warrant further investigation, it doesn't directly assess the reliability of current year transactions and could miss issues if the prior year's data was also inaccurate.
Considering the aim is to ensure the effectiveness of the control system and tie the tires purchased with their actual usage, Option 1 is the best course of action for the internal auditor in this circumstance. It precisely addresses the concern of whether purchased items are adequately accounted for and utilized in a manner consistent with company records and policies.