Which of the following audit procedures should be used to test the auditor’s theory?

An internal auditor is asked to determine why the production line for a large manufacturing organization has been experiencing shutdowns due to unavailable parts The auditor learns that production data used for generating automatic purchases via electronic interchange is collected on personal computers connected by a local area network (LAN) Purchases are made from authorized vendors based on both the production plans for the next month and an authorized materials requirements plan (MRP) that identifies the parts needed per unit of production. The auditor suspects the shutdowns are occurring because purchasing requirements have not been updated for changes in production techniques.

Which of the following audit procedures should be used to test the auditor’s theory?
A . Compare purchase orders generated from test data Input into the LAN with purchase orders generated from production data for the most recent period.
B . Develop a report of excess inventory and compare the inventory with current production volume.
C . Compare the parts needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period
D . Select a sample of production estimates and MRPs for several periods and trace them into the system to determine that input is accurate

View Answer

Answer: C

Explanation:

To test the theory that shutdowns are due to outdated purchasing requirements, the auditor should compare the parts needed according to the revised production techniques with the purchase orders generated. This comparison will reveal whether the system has been updated to reflect changes in production techniques, thereby identifying any discrepancies causing the unavailability of parts.

Reference: The practice of matching current production estimates with the materials requirements plan (MRP) aligns with standard audit procedures for validating the accuracy and relevance of system-generated purchase orders.