Identify And Document Key Business Processes Practice Test

You are performing a nonissuer financial statement audit and management implemented a new cloud-based inventory system that integrates purchasing, receiving, and production consumption. The auditor observed that receiving reports are no longer manually matched to purchase orders, and inventory adjustments increased during the year. The auditor needs to map and understand business processes to assess risk of material misstatement in inventory and cost of sales. Which process should the auditor document to assess risk?

You are performing a nonissuer financial statement audit. The client’s monthly close includes manual journal entries prepared by the controller and posted by the same person due to staffing shortages, and several prior-year audit adjustments related to cutoff were recorded late. The auditor is determining how to document key business processes to assess risk and design further audit procedures. Based on the auditor's analysis, how should the business process be documented?