Which question helps determine whether a client's system is in place?

Which question helps determine whether a client's system is in place?

• A. Is system capable of producing financial statements?
• B. Does the system produce management reports?
• C. Are there documented policies and procedures?
• D. Has the system been audited previously?

Answer: (A)

The main idea is to look for evidence that the actual system can perform the essential outputs it’s supposed to deliver. For an accounting system, the most fundamental test is whether it can generate financial statements. If the system is capable of producing these statements, it shows that the data flows, processing, and reporting are functioning and integrated, which is a strong signal that the system is in place and operational. Other indicators are weaker because they don’t prove the core operation. Management reports can sometimes be produced separately from the main system or through manual processes. Documented policies and procedures show how things should work, but they don’t confirm that the system is actually in place or being used. A prior audit demonstrates history but may not reflect current operation if there have been changes.

The main idea is to look for evidence that the actual system can perform the essential outputs it’s supposed to deliver. For an accounting system, the most fundamental test is whether it can generate financial statements. If the system is capable of producing these statements, it shows that the data flows, processing, and reporting are functioning and integrated, which is a strong signal that the system is in place and operational.

Other indicators are weaker because they don’t prove the core operation. Management reports can sometimes be produced separately from the main system or through manual processes. Documented policies and procedures show how things should work, but they don’t confirm that the system is actually in place or being used. A prior audit demonstrates history but may not reflect current operation if there have been changes.