Vertical analysis expresses each financial statement item as a percentage of a base figure (e.g., revenue). In this case, the internal auditor calculates electricity and depreciation expenses as a percentage of revenue, which is a clear application of vertical analysis.
(A) Horizontal analysis:
Compares financial data across different periods to identify trends and growth.
The given scenario does not compare financial statements over time, making this incorrect.
(B) Vertical analysis (Correct Answer):
Expresses each line item as a percentage of a base figure (e.g., revenue for income statements, total assets for balance sheets).
In this case, electricity and depreciation expenses are calculated as a percentage of revenue, confirming vertical analysis.
(C) Ratio analysis:
Involves calculating financial ratios (e.g., profitability, liquidity, efficiency).
This scenario does not involve ratios but rather percentage-based comparisons, making it incorrect.
(D) Trend analysis:
Identifies patterns over multiple periods (e.g., revenue growth over five years).
The question does not involve time-based comparisons, so this answer is incorrect.
IIA Practice Guide: Internal Audit and Financial Reporting - Recommends vertical analysis for financial statement assessment.
IIA Standard 2320 - Analysis and Evaluation - Requires auditors to apply relevant analytical techniques, including percentage-based evaluations.
COSO Internal Control Framework - Financial Reporting Component - Supports financial data analysis techniques such as vertical and horizontal analysis.
Analysis of Each Option:IIA References:Conclusion:Since the auditor expressed financial statement items as a percentage of revenue, option (B) is the correct answer.

Internal audit may rely on the work of other internal assurance providers (such as finance or compliance), provided it has assessed the adequacy, competence, and objectivity of the work. This avoids duplication and increases efficiency.
Option B incorrectly assumes internal work cannot be relied upon. Option C shifts responsibility inappropriately. Option D ignores coordination opportunities.
Reference:
IIA Standards - Standard 2050: Coordination and Reliance.

Comprehensive and Detailed In-Depth Explanation:
Smart devices often incorporate advanced security features that enhance secure authentication mechanisms.
These features may include biometric sensors (such as fingerprint readers or facial recognition), hardware tokens, and secure enclaves that store authentication credentials. By utilizing these technologies, smart devices provide robust methods to verify user identities, thereby strengthening access controls to sensitive information and systems. While smart devices do offer portability (option C), their primary contribution to security lies in enhancing authentication processes. Version control (option A) pertains to managing changes in software or documents and is not directly impacted by smart devices. Privacy (option B) can be influenced by smart devices, but the direct improvement is in secure authentication, which in turn can support privacy protections.

The specific identification method is an inventory costing approach where the actual cost of each individual unit sold is recorded. This method is used when items are uniquely identifiable, such as in industries dealing with luxury goods, automobiles, or custom-manufactured products.
Correct Answer (D - Specific identification)
Under the specific identification method, each inventory unit is tracked separately, and its actual purchase cost is assigned to the cost of goods sold (COGS) when sold.
This method is commonly used for high-value, low-volume items where unique tracking is feasible.
The IIA's GTAG 8: Audit of Inventory Management explains how different costing methods impact financial reporting and internal controls.
Why Other Options Are Incorrect:
Option A (LIFO - Last-in, First-out):
LIFO assumes that the most recent (last-in) inventory is sold first, but it does not track actual unit cost.
Instead, it assigns the cost of the newest inventory to COGS.
LIFO is often used for tax benefits but does not follow actual unit cost identification.
Option B (Average cost):
The weighted average cost method calculates an average cost for all inventory units rather than assigning actual unit costs.
This method smooths out price fluctuations but does not track specific items' costs.
Option C (FIFO - First-in, First-out):
FIFO assumes that the oldest (first-in) inventory is sold first, assigning its cost to COGS.
However, like LIFO, it does not track individual unit costs.
IIA GTAG 8: Audit of Inventory Management - Explains different inventory costing methods, including specific identification.
IIA Practice Guide: Assessing Inventory Risks - Covers inventory valuation and fraud risks.
Step-by-Step Explanation:IIA References for Validation:Thus, the specific identification method (D) is the only one that accounts for the actual cost paid for each unit sold.

Reference: IIA Business Knowledge for Internal Auditing, IT Application Controls section.