A retail entity uses electronic data interchange (EDI) in
executing and recording most of its purchase transactions. The
entity’s auditor recognized that the documentation of the transactions
will be retained for only a short period of time. To compensate
for this limitation, the auditor most likely would

(b) The requirement is to identify an effective audit
approach in an EDI environment in which documentation of
transactions will be retained for only a short period of time. Answer
(b) is correct because performing tests throughout the year
will allow the auditor to examine transaction documentation
before the transactions are destroyed. Answer (a) is incorrect
because if documentation relating to the transactions is not maintained,
it will be impossible to perform such cutoff tests. Answer
(d) is incorrect because such a situation need not lead to a 100%
count of inventory at or near year-end. Answer (d) is incorrect
because an increase in the assessed level of control risk rather
than a decrease is more likely.