Which of the following best defines 'exception reporting' in auditing?

Exception reporting in auditing is best defined as a technique focusing on abnormal results. This method is important because it allows auditors to concentrate on discrepancies or unusual transactions that deviate from expected norms or standards. By identifying exceptions, auditors can prioritize their investigations on critical issues that may indicate potential fraud or inefficiencies within an organization.

The essence of exception reporting lies in its ability to direct attention toward issues that matter most, thereby enhancing the effectiveness of the audit process. This targeted approach not only helps in identifying areas requiring immediate corrective action but also assists in improving overall operational compliance and governance.

In contrast, highlighting all transactions would lead to an overwhelming volume of information that could obscure significant findings. A comprehensive overview of all audit findings would not specifically pinpoint areas of concern, while a report that does not require any follow-up would lack the necessary focus on actions needed to address identified discrepancies. Thus, focusing on abnormal results is key to effective exception reporting in auditing.