Week 7

When control risk is assessed at the maximum, the extent of documentation required in the working papers is that:

no documentation is necessary.

the basis for the assessment and the conclusion must both be documented.

only the conclusion needs to be documented.

only the basis for the assessment must be documented.

Based on a study and evaluation completed at an interim date, the auditor concludes that no significant internal accounting control weaknesses exist. The records and procedures would most likely be tested again at year-end if:

the internal accounting control system provides a basis for reliance in reducing the extent of substantive testing.

tests of controls were not performed by the internal auditor during the remaining period.

inquiries and observations lead the auditor to believe that conditions have changed.

the auditor uses non-statistical sampling during interim compliance testing.

Which of the following would be a necessary control to avoid an invoice being paid twice?

periodic bank reconciliations.

segregating the duties of approving invoices and signing cheques.

invoice stamped paid when the cheque is issued.

making payments by cheque.

Tests of controls are auditing procedures performed to determine:

whether required internal controls have been put in place.

the efficiency of the information flow

the effectiveness of the design and operation of internal controls.

b and c

In a computer information system control procedures that provide reasonable assurance that the recording, processing and reporting of data are properly performed for specific applications are known as:

application controls

general controls

user controls

integrated testing.

6. The relationship between the required understanding of the internal control structure and the preliminary audit strategy is that:

normally, greater understanding is required when the lower assessed level of control risk approach is used.

normally, greater understanding is required when the primarily substantive approach is used.

no understanding is required in the planning stage unless tests of controls are a planned part of the strategy.

normally, less understanding is required when the lower assessed level of control risk approach is used.

What is the purpose of the preliminary assessment of control risk?

to obtain a reasonable expectation of controls so as to decide on an appropriate audit strategy.

to determine the extent to which internal controls have been implemented

to obtain the necessary information for developing the flowchart.

to provide management with an opinion on the effectiveness of controls.

A disadvantage of the integrated test facility approach to computer assisted audit is:

there is a risk that errors could be created in the client's data

it does not overcome the limitations of the use of test data

it is disruptive to the client.

all the above are limitations.

Assessing control risk at a level below high most likely would involve:

identifying specific internal controls relevant to specific assertions.

changing the timing of substantive tests by omitting interim testing and performing the tests at year-end.

reducing inherent risk for most of the assertions relevant to significant account balances.

performing more extensive substantive tests with larger sample sizes than originally planned.

The audit test that would normally be regarded as a test of controls is:

enquiries of third parties

test of the specific items making up the balance in a given general ledger account.

test of the additions to property, plant, and equipment by physical inspections.

test of the signatures on purchase orders to a list of approved signatories.

Of the following, the procedure that would produce the most reliable evidence on the segregation duties is:

observation.

analytical procedures

reconciliation.

re-performance.

Which of the following would be a necessary control to avoid an invoice being paid twice

periodic bank reconciliations.

segregating the duties of approving invoices and signing cheques.

invoice stamped paid when the cheque is issued.

making payments by cheque.

The timing of tests of controls refers to:

whether they are performed earlier or later during the audit.

whether they relate to part or the whole of the accounting period.

the end of the year being audited.

none of the above.

The untrue statement concerning the communication of internal control matters to management during a financial statement audit is:

the duties relating to communication are included in ASA 265/ISA 265

the auditor shall communicate in writing significant deficiencies in internal control identified

circumstances where it may be inappropriate to communicate deficiencies in the internal control system includes situations where there are other deficiencies that are of sufficient importance to merit management's attention

none of the statements are untrue, i.e. all are true statements

Based on a study and evaluation completed at an interim date, the auditor concludes that no significant internal accounting control weaknesses exist. The records and procedures would most likely be tested again at year-end if:

the internal accounting control system provides a basis for reliance in reducing the extent of substantive testing.

tests of controls were not performed by the internal auditor during the remaining period.

inquiries and observations lead the auditor to believe that conditions have changed.

the auditor uses non-statistical sampling during interim compliance testing.

After performing additional tests of controls, the auditor reassesses control risk from the initial planning level of slightly below maximum to moderate. The auditor should now:

decrease the level of detection risk, and decrease substantive testing.

increase the level of detection risk, and increase substantive testing.

increase planned substantive testing.

increase the level of detection risk, and decrease substantive testing.

After the auditor planned the audit based on the lower assessed level of control risk approach it was found that the tests of control did not support this approach. Although the controls were well designed they were not implemented and therefore ineffective. What audit strategy should the auditor now pursue?

adopt a predominantly substantive approach.

perform more extensive tests of control than originally planned.

reduce the level of substantive procedures.

none of the above.

When tests of controls are not performed while obtaining an understanding under the primarily substantive approach:

they must be performed at year-end.

preliminary control risk must be assessed at the maximum.

preliminary control risk must be assessed at below maximum.

preliminary control risk must be assessed at the minimum.

Assessing control risk at a level below high most likely would involve:

identifying specific internal controls relevant to specific assertions.

changing the timing of substantive tests by omitting interim testing and performing the tests at year-end.

reducing inherent risk for most of the assertions relevant to significant account balances.

performing more extensive substantive tests with larger sample sizes than originally planned.

What is the purpose of the preliminary assessment of control risk?

to obtain a reasonable expectation of controls so as to decide on an appropriate audit strategy.

to determine the extent to which internal controls have been implemented

to obtain the necessary information for developing the flowchart.

to provide management with an opinion on the effectiveness of controls.