Which of the following analytical procedures should an internal auditor use to determine whether monthly expenses for the accounting department are reasonable?
A.
Review year-over-year trending of total dollars spent in each period.
B.
Review changes to the vendor master file for suspicious activity.
C.
Review the percentage of on-time payments against prior periods.
D.
Review total expenses for accounting against other department expenses in the organization.
A. Review year-over-year trending of total dollars spent in each period:This is the correct approach because year-over-year analysis focuses on identifying anomalies or significant variances in expenses over time. Trends in data can help detect unexpected spikes, dips, or patterns that indicate irregularities or inefficiencies. This aligns with analytical procedures in expense analysis under the CIA Exam Syllabus Part 2, which emphasizes the use of comparative techniques to evaluate reasonableness.
B. Review changes to the vendor master file for suspicious activity:While reviewing vendor master file changes is essential for fraud detection and control testing, it does not directly help in determining the reasonableness of monthly expenses.
C. Review the percentage of on-time payments against prior periods:Examining payment timeliness relates to operational efficiency and cash flow management, not directly to evaluating whether monthly expenses are reasonable.
D. Review total expenses for accounting against other department expenses in the organization:Comparing accounting department expenses to those of other departments might indicate disparities but does not consider differences in department-specific activities and needs.
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