Learn about the auditing technique used to review vendor invoices and debit notes to confirm the accuracy of transactions and recovery of overpayments. Prepare for the IIA CIA Part 2 exam with this sample question and explanation of vouching vs. tracing, inspection, and observation.
Table of Contents
Question
An internal auditor reviews vendor invoices for accuracy. The auditor identifies an instance where a vendor was overpaid. The accounts payable manager explained that a debit note was later issued against the vendor and the overpayment was recovered. The auditor confirmed the amount recovered was accurate. Which of the following techniques did the auditor use?
A. Observation.
B. Inspection.
C. Vouching.
D. Tracing.
Answer
The auditing technique used in this scenario is:
C. Vouching.
Explanation
Vouching is an auditing technique that involves selecting recorded transactions and verifying their accuracy, validity, and authorization by examining supporting documents. In this case, the auditor reviewed the vendor invoices (source documents) to verify the accuracy of the recorded payment. Upon identifying an overpayment, the auditor then examined the debit note issued to the vendor to confirm that the overpayment was accurately recovered.
The other options are not the best fit for this scenario:
A. Observation involves watching a process or procedure being performed by others. It does not involve examining supporting documents.
B. Inspection involves examining records, documents, or tangible assets to assess their condition, quantity, or existence. While the auditor did examine documents in this scenario, the primary purpose was to verify the accuracy of recorded transactions, which aligns more closely with vouching.
D. Tracing is the opposite of vouching. It involves selecting source documents and tracing them to their recording in the accounting records. In this scenario, the auditor started with the recorded transactions (vendor payments) and verified them against the source documents (invoices and debit note), which is vouching.
In summary, vouching is the auditing technique used to verify the accuracy, validity, and authorization of recorded transactions by examining supporting documents, as demonstrated in this scenario where the auditor reviewed vendor invoices and a debit note to confirm the accuracy of the payment and recovery of the overpayment.
IIA-CIA-Part2 certification exam assessment practice question and answer (Q&A) dump including multiple choice questions (MCQ) and objective type questions, with detail explanation and reference available free, helpful to pass the IIA-CIA-Part2 exam and earn IIA-CIA-Part2 certification.