11 Questions
Why might an auditor choose the substantive audit strategy over the reliance strategy?
Because it provides information on the risk of misstatement.
What is a common limitation of an entity's internal control due to senior management?
Management override.
In the context of internal controls, what can lead to system errors or mistakes?
Human involvement in design, maintenance, or monitoring.
Why is the reliance strategy often expected for public companies, especially after SOX?
To rely on entity's internal control.
What can make segregation of duties inefficient according to the text?
People working against segregation of duties.
What is the purpose of performing tests of the identified controls in an audit?
To confirm the level of control risk when using reliance strategy
Which of the following is considered the least effective type of test during Assessing Control Risk?
Inquiry of entity personnel
What determines the extent of substantive procedures in an audit?
Detection risk
Why might an auditor perform interim substantive procedures during an audit?
Because assertion may not be significant
What is the purpose of reports about controls at external sources, such as Type 1 and Type 2 reports?
To assess the design and operational effectiveness of systems
Which type of controls are concerned with preventing errors and accuracy assertions in an audit?
Validation controls
This quiz covers audit strategies such as Substantive and Reliance strategies, along with the limitations of an entity's internal control. Topics include setting control risk high, not relying on entity's controls, setting control risk at a lower level, and more.
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