When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be
A) tracing.
B) vouching.
C) performing a walkthrough.
D) testing controls.

Question

Quizplus · Accepted Answer

The process described in the question is that of a walkthrough, where the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system. Tracing (choice A) and vouching (choice B) are specific audit procedures that involve following transactions from the source documents to the financial statements (tracing) or from the financial statements to the source documents (vouching). Testing controls (choice D) involves evaluating the effectiveness of internal controls to ensure that they are operating as intended. While a walkthrough may involve testing controls, it is primarily used as a means of gaining an understanding of the accounting system.

When the Auditor Attempts to Understand the Operation of the Accounting