In: Accounting
Test of controls are concerned primarily with each of the following questions, except
d. Why were the controls applied
Controls should be assessed in terms of
c. Financial statement assertion
The following statement relate to the use of audit evidence when testing the operating effectiveness of relevant controls. Which is false
a. An auditor who obtains sufficient appropriate audit evidence about the operating effectiveness of controls during the interim period should no longer obtain additional evidence of operating effectiveness for the remaining period
After gaining an understanding of internal control and assessing the risk of material misstatement, auditor decided to perform test of controls. The auditor most likely decided that
b. It is not possible or practicable to reduce the risk of material misstatement at the assertion level to an acceptably low level with audit evidence obtained only from substantive audit procedures
An auditor may decide to assess control risk at the maximum level for certain assertions because the auditor believes
a. Controls are unlikely to pertain to the assertions
Which of the following statements is correct concerning an auditor assessment of control risk
a. Assessing control risk maybe performed concurrently during an audit with obtaining an understanding of the entity internal control
According to PSA 330, an auditor who plans to rely on controls that have not changed since they were last tested should be test the operating effectiveness of such controls at least once every
a. Second audit
On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would
d. Decreased detection risk
When the auditor increased the planned assessed level of control risk because certain controls were determined to be ineffective the auditor would most likely increase the
a. Extent of test of details
Regardless of the assessed level of control risk, an auditor would perform some
c. Substantive test to restrict detection risk for significant transaction classes
An auditor is least likely to test control that provide for
b. Classification of revenue and expense transactions by product line
When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs
c. Test of controls and limited test of current year property and equipment transactions
Test of controls are least likely to be omitted with regard to
c. Accounts representing many transactions
Which of the following type of evidence would an auditor most likely examine to determine whether controls are operating as designed
d. Client records documenting the use of computer programs
An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise, which of the following procedures provides the greatest assurance that this control is operating effectively
d. Select and examine cancelled checks and ascertain that the related receiving reports are dated no later than the checks
Based on observations made during an audit, the independent auditor should discuss with management the effectiveness of the company controls that protect against the purchase of
d. Supplies individually ordered without considering possible volume discount
In assessing control risk for the purchasing cycle, the auditor would be least influence by
a. The effectiveness of controls in other cycles
An auditor uses the knowledge provided by the understanding of internal control and the final assessed level of control risk primarily to determine the nature, extent and timing of
d. Substantive test
Which of the following test of controls most likely would help assure an auditor that goods shipped are properly billed
b. Examines shipping documents for matching sales invoices
An auditor intends to perform test of control on a client cash disbursement procedures. If the control procedures leave no audit trail of documentary evidence the auditor most likely test the procedures by
b. Inquiry and observation