Certified Government Auditing Professional (CGAP) Practice Exam

What best describes the purpose of a walk-through in auditing internal controls?

1. To validate the recording of transactions

2. To trace a transaction through the accounting system

3. To document the control environment

4. To verify compliance with legal standards

The correct answer is: To trace a transaction through the accounting system

A walk-through in auditing internal controls involves tracing a transaction through the accounting system from its initiation to its final recording in the financial statements. This process allows auditors to gain a comprehensive understanding of the internal controls in place, assess their design and operating effectiveness, and identify how transactions are processed within the organization's system. By selecting a specific transaction, auditors can observe the various steps and controls applied at each stage, thus providing insight into potential weaknesses or areas for improvement within the internal control framework. This method is essential for evaluating whether the recorded transactions are accurate and for testing the effectiveness of the internal controls in mitigating risks. On the other hand, while validating the recording of transactions, documenting the control environment, and verifying compliance with legal standards are all important aspects of an audit, these activities do not specifically encapsulate the primary purpose of a walk-through, which focuses on the flow and processing of a transaction through various controls.