Question

Which of the following strategies would a cpa most likely consider in auditing an entity that processes most of its financial data only in electronic form, such as a paperless system?

O continuous monitoring and analysis of transaction processing with an embedded audit module.
O extensive testing of firewall boundaries that restrict the recording of outside network traffic.
O increased reliance on internal control activities that emphasize the segregation of duties.
O verification of encrypted digital certificates used to monitor the authorization of transactions.

Answer 1

The correct answer is option 1. The CPA's most likely strategy in auditing an entity that processes financial data in electronic form is continuous monitoring and analysis with an embedded audit module.

Step-by-step explanation:

The strategy that a CPA would most likely consider in auditing an entity that processes most of its financial data only in electronic form is continuous monitoring and analysis of transaction processing with an embedded audit module. This strategy involves the use of technology to continuously monitor and analyze transactions in real-time. With an embedded audit module, the CPA can track and review electronic transactions, identify any errors or irregularities, and ensure the accuracy and integrity of the financial data.

By implementing continuous monitoring and analysis, the CPA can proactively detect any potential issues or risks in the electronic system and take immediate actions to mitigate them. This strategy also allows for faster identification of errors or discrepancies, reducing the likelihood of material misstatements in the financial statements.

Furthermore, continuous monitoring and analysis with an embedded audit module provides a higher level of assurance and reliability compared to manual or periodic audits. The technology-driven approach allows for comprehensive and detailed examination of electronic transactions, ensuring the completeness, accuracy, and consistency of the financial data.

Answer 2

A CPA auditing a paperless system may use continuous monitoring with an audit module, emphasize the segregation of duties, or verify encrypted digital certificates to ensure transaction integrity and authorization.

Step-by-step explanation:

In auditing an entity that processes its financial data in electronic form, such as a paperless system, a CPA would likely consider several strategies. One effective strategy is continuous monitoring and analysis of transaction processing with an embedded audit module. This approach enables real-time or near-real-time review of transactions and systems, providing the CPA with ongoing assurance about data integrity and processing accuracy. Another strategy would be to increase reliance on internal control activities that place a strong emphasis on the segregation of duties. This is vital in any system but becomes even more so in an electronic environment where transactions can be processed quickly and without a paper trail. Lastly, the CPA might verify encrypted digital certificates used to monitor the authorization of transactions, ensuring that each transaction is both secure and authorized.