Control 2:
If a company’s control risk is initially assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls. For the following control activity listed, do the following two tasks:
a. Describe the test of control that the auditor would use to determine the operating effectiveness of the control.
b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control is not working as planned. In doing so, indicate (a) what misstatement could occur because of the control deficiency, and (b) how the auditor’s substantive tests should be expanded to test for the potential misstatement.
Control Activity:
2. All merchandise receipts are recorded on pre-numbered receiving slips. The controller’s department periodically accounts for the numerical sequence of the receiving slips.
Task A)
Task B)
Answer -
|
. Control Activity |
(A) Test of Control |
(B) Modification of Audit Procedures if Control is not Effective |
| All merchandise receipts are recorded on pre-numbered receiving slips. The controller’s department periodically accounts for the numerical sequence of the receiving slips. | Choose a time to check the numerical sequence of the receiving slips that is not usually chosen to account for them. |
a). With having a control deficiency it could cause the loss of some of the receiving slips, which would cause inventory problems. b). The auditors tests should be expanded to check the numerical sequence of all receiving slips for an allotted period of time to see if may be receiving slips are being mixed up at certain time. |
Control 2: If a company’s control risk is initially assessed as low, the auditor needs to...
If a company’s control risk is initially assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls. For each of the following control activities listed as (1)–(10), do the following two tasks: a. Describe the test of control that the auditor would use to determine the operating effectiveness of the control. b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control is not working as...
If a company’s control risk is initially assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls. For each of the following control activities listed as (1)–(10), do the following two tasks: a. Describe the test of control that the auditor would use to determine the operating effectiveness of the control. b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control is not working as...
Control 1: If a company’s control risk is initially assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls. For the following control activity listed, do the following two tasks: a. Describe the test of control that the auditor would use to determine the operating effectiveness of the control. b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control is not working as planned. In...
If a company’s control risk is initially assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls. For each of the following control activities listed as (1)–(10), do the following two tasks: a. Describe the test of control that the auditor would use to determine the operating effectiveness of the control. b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control is not working as...
Which of the following is a false statement about the assessment of the risks of material misstatement? A. The assessed levels will affect the nature, timing, and extent of substantive testing. B. The auditor may use certain tests of details of transactions concurrently as tests of controls. C. The ultimate purpose is to determine the operating effectiveness of controls. D. The auditor’s understanding of internal control should be documented.
Which of the following should an auditor do when control risk is assessed at the maximum level? Multiple Choice A. Document the control structure more extensively. B. Perform fewer substantive tests of details. C. Document the assessment. D. Perform more tests of controls.
If an auditor decides to assess control risk as low based on IT application control procedures, which of the following would not be part of the auditor’s strategy for testing controls? a. Testing the effectiveness of management review controls used to monitor the results of operations. b. Testing the effectiveness of manual follow-up procedures. c. Testing the effectiveness of the application with test data. d. Testing the effectiveness of IT general control procedures.
The auditor has provided a preliminary assessment of control risk of low in the revenue cycle accounts of Acco, Inc. for each of the relevant assertions. The auditor selected a sample of sales transactions for control testing. Each of the following types of control or transaction-processing deficiencies uncovered in the sample was significant enough to cause the auditor to increase control risk assessment from low to moderate. For each deficiency, label as (a) through (i), discuss the type of financial...
Question: Question 183 Processing auditor test data using the client's software application _______. -will allow the auditor to verify manual controls within the software application are functioning as designed -may corrupt the client's system, and should not be attempted -will allow the auditor to verify that the software application is functioning as designed -should be performed without the knowledge of the client's senior management Question 19 The tolerable deviation rate _______. -relates to how many immaterial misstatements the auditor finds...
1.Which of the following is not one of the steps the auditor must perform to assess control risk at less than “high” for a financial statement assertion? A) obtain an understanding of internal control B) identify controls that address all relevant assertions in the financial statements C) make a preliminary assessment of control risk based on the design of relevant controls D) test the operating effectiveness of the controls that must be effective to reduce control risk 2.Which of the...