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    This addresses tests of acquisitions and cash disbursements

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    Evaluate the following statement by an auditor concerning tests of acquisitions and cash disbursements:

    In selecting the acquisitions and cash disbursements sample for testing, the best approach is to select a random month and test every transaction for the period. Using this approach enables me to thoroughly understand internal controls because I have examined everything that happened during the period. As a part of the monthly test, I also test the beginning and ending bank reconciliations. At the completion of these tests I feel I can evaluate the effectiveness of internal control.

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    https://brainmass.com/business/mergers-and-acquisitions/this-addresses-tests-of-acquisitions-and-cash-disbursements-474781

    Solution Preview

    Testing every single transaction defeats the purpose of random testing. It is too time-consuming and not realistic on an actual audit to test every transaction. The auditor will take into account the account being tested and then determines a population, which never includes every single transaction in the test. The population is then tested in the ...

    Solution Summary

    The solution explains the following comment:

    In selecting the acquisitions and cash disbursements sample for testing, the best approach is to select a random month and test every transaction for the period. Using this approach enables me to thoroughly understand internal controls because I have examined everything that happened during the period. As a part of the monthly test, I also test the beginning and ending bank reconciliations. At the completion of these tests I feel I can evaluate the effectiveness of internal control.

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