Audit and Assurance Practice Exam

Which control is specifically related to the existence or occurrence of transactions?

1. Conducting surprise audits

2. Distributing monthly statements

3. Reviewing customer accounts

4. Maintaining purchase orders

The correct answer is: Distributing monthly statements

Distributing monthly statements directly relates to verifying the existence or occurrence of transactions. By providing account statements to customers, an organization allows them to confirm the transactions that have occurred within a given period. This control serves as a mechanism for customers to identify any discrepancies, fraudulent transactions, or errors that might have occurred. It creates a feedback loop, where the validity of reported transactions is cross-verified by external parties, thus enhancing the reliability of the financial records. Other options, while they may contribute to overall internal control mechanisms, do not specifically target the existence or occurrence of transactions in the same manner. For instance, conducting surprise audits is more about overall compliance and risk management rather than targeting specific transactions, reviewing customer accounts focuses on reconciliation rather than confirming reported transactions, and maintaining purchase orders pertains more to the authorization and processing of transactions rather than confirming their validity or occurrence after they have taken place.