Question

Which of the following best describes the reason an auditor performs a walkthrough of transactions from inception through financial statement presentation?

1) To ensure that the single transaction type involved in a walkthrough is properly recorded in the general ledger
2) To determine if a necessary control is missing or ineffective
3) To determine the different types of significant transactions handled by the process

Answer 1

Auditors perform walkthroughs to determine if necessary controls are missing or ineffective, which assists them in assessing the system's integrity.

Step-by-step explanation:

The reason an auditor performs a walkthrough of transactions from inception through financial statement presentation is to determine if a necessary control is missing or ineffective. This process involves tracing a transaction from its initiation through the company’s processes until it is reflected in the financial statements. This helps the auditor to understand the flow of transactions, assess the design and implementation of controls, and identify any weaknesses or errors in the system.

The reason an auditor performs a walkthrough of transactions from inception through financial statement presentation is to determine if a necessary control is missing or ineffective. By walking through the transaction process, auditors can identify any deficiencies or weaknesses in the internal control system. This helps the auditor assess the overall reliability of the financial statements and identify areas that need improvement.