How does ICMR support external audits?

• A. By providing random transaction reports
• B. By offering detailed financial forecasts
• C. By providing transparent documentation of transactions
• D. By maintaining physical records of all transactions

Answer: (C)

ICMR supports external audits primarily through the provision of transparent documentation of transactions. This transparency enables auditors to efficiently review and verify intercompany transactions. By ensuring comprehensive documentation, organizations can easily demonstrate compliance with financial reporting standards and regulations during an audit. It allows for traceable and easily accessible records, making the auditor's job simpler and more effective in ensuring that all transactions are accurate and properly accounted for.

In contrast, while random transaction reports and financial forecasts may provide insights into company performance, they do not offer the level of detail or accuracy required for auditing purposes. Maintaining physical records, although valuable in some contexts, does not enhance the transparency and ease of access afforded by digital documentation systems inherent in ICMR. Thus, the clarity and detail associated with transaction documentation directly support the objectives of an external audit.