Exam 9: Assessing Control Risk and Designing Test of Controls

The auditor may identify some risks that cannot be effectively tested by substantive tests alone,for example,when there are paperless transactions (perhaps using EDI - electronic data interchange).To address these risks,the auditor is required to

The existence of advanced automated systems affects the audit process.Which of the following characteristics is an indicator of the presence of an advanced automated information system?

When a compensating control exists,a weakness in the system

When planning the audit,the auditor's decision on the appropriate assessed level of control risk to use is

When the auditor identifies opportunities for the client to make operational improvements in the internal control system,it will be communicated to the client's audit committee in the

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

The Sarbanes Oxley Act has had consequences for many areas of corporate activities,including the following impact on the work of the auditor:

Greenvale Construction Limited was started by four brothers who lived in the Toronto area.Over time,the brothers moved to different parts of the country.They decided it was a good idea to keep the company and organize their work as separate divisions under the same company.There are now three divisions,one for each of the brothers who are actively involved in construction.The fourth brother,Ted,is responsible for accounting and record keeping.Ted went back to school and completed an accounting designation,and now has three employees in the accounting area. Each of the brothers has moved on to specialize in a different kind of construction work.In Toronto,it is mainly new home construction.In Edmonton,the work is primarily renovations of large homes and small commercial enterprises.In Halifax,the work is mid-sized to large commercial projects.All of the brothers prefer to subcontract their work rather than hiring full time construction employees,although some of the subcontract relationships have lasted over fifteen years now. Required: Explain what you would do to document your understanding of internal control for Greenvale.Identify potential risk areas where you would need to focus additional attention.

Once an understanding of internal controls is obtained that is sufficient for audit planning,then the auditor must first assess

What are the two types of reports service auditors issue?

The Sarbanes-Oxley Act requires management to certify that it has informed the auditor and audit committee of any

The existence of advanced automated systems affects the audit process.Which of the following characteristics is an indicator of the presence of an advanced automated information system?

Describe a five-step approach that is used for identifying significant or material internal control weaknesses.

Identify the difference among control deficiency,significant deficiency,and material weakness.

When services are outsourced to a third party service provider that significantly impact financial reporting,what should the auditor do to gain evidence over the operating effectiveness of the internal controls at the third party?

Ideally,tests of controls should be applied to controls

Control tests are required for