The effect of ITF transactions should be removed:
A) on a surprise basis.
B) after the conclusion of the audit.
C) by inputting adjustment transactions.
D) by the internal audit group.

Question

Quizplus · Accepted Answer

The effect of ITF transactions should be removed by inputting adjustment transactions. This will ensure that the financial statements accurately portray the actual transactions and not the temporary ITF transactions. Option A is not practical as removing the effect on a surprise basis may lead to errors and inconsistency. Option B suggests removing the effect after the conclusion of the audit, which is not desirable as it may misstate the financial statements during the audit period. Option D suggests using the internal audit group to remove the effect, but this is not desirable as it may compromise the independence and objectivity of the audit process.

The Effect of ITF Transactions Should Be Removed