Question
I need more explanation about why the answer is correct or wrong. 1) Which of the following statements relating to control activities employed in the
I need more explanation about why the answer is correct or wrong.
1) Which of the following statements relating to control activities employed in the expenditure (inventory purchases) cycle ismost correct?
A.To addressoccurrencefor inventory purchases, the client should count, inspect and compare the inventory delivered against the purchase order and follow up all exceptions.
B.To addressoccurrencefor inventory purchases, the client should check that all pre-numbered receiving reports are accounted for and included in a voucher packet, and follow up all exceptions.
2) Which of the following statements relating to tests of controls ismost correct?
C.Effective performance of planned tests of controls is less critical in reducing audit risk than effective performance of planned substantive tests.
D.Before conducting tests of controls on a control activity, the auditor will already have formed a view as to the likelihood that the control being tested will be found to be operating effectively over the intended period of reliance.
3)Which of the following conclusions drawn by the auditor ismost valid?
E.The control that the auditor was planning to rely on was found, upon completion of the tests of controls, to be ineffective and there are no compensating controls that the auditor can identify or wishes to test. The auditor, therefore, plans to achieve a lower level of inherent risk than originally anticipated.
F.Upon the completion of tests of controls, the sample deviation rate was found to be lower than the tolerable deviation rate. The auditor, therefore, concludes that the control activity can be relied on.
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