Podcast
Questions and Answers
What is the most likely reason the auditor would use to reconsider the assessed control risk?
What is the most likely reason the auditor would use to reconsider the assessed control risk?
- The tests of controls indicate the controls did not operate effectively (correct)
- The tests of controls indicate the controls operated effectively
- The auditor wants to apply more extensive tests of controls
- The preliminary assessed control risk was too high
Which of the following procedures would the auditor most likely use to support the operating effectiveness of internal controls?
Which of the following procedures would the auditor most likely use to support the operating effectiveness of internal controls?
- Inspect the client's physical assets
- Perform analytical procedures
- Examine documents, records, and reports (correct)
- Inquire about the client's accounting policies
How does the extent of tests of controls applied by the auditor depend on the preliminary assessed control risk?
How does the extent of tests of controls applied by the auditor depend on the preliminary assessed control risk?
- The extent of tests of controls is determined solely by the results of the tests of controls
- The lower the preliminary assessed control risk, the more extensive the tests of controls (correct)
- The extent of tests of controls is independent of the preliminary assessed control risk
- The higher the preliminary assessed control risk, the more extensive the tests of controls
What is the primary purpose of the auditor using the control risk assessment and results of tests of controls?
What is the primary purpose of the auditor using the control risk assessment and results of tests of controls?
Which of the following procedures is NOT listed in the text as one the auditor is likely to use to support the operating effectiveness of internal controls?
Which of the following procedures is NOT listed in the text as one the auditor is likely to use to support the operating effectiveness of internal controls?
What is the purpose of control activities in an organization?
What is the purpose of control activities in an organization?
What is the significance of considering fraud risk in assessing risks to objectives?
What is the significance of considering fraud risk in assessing risks to objectives?
What does the deployment of control activities involve in an organization?
What does the deployment of control activities involve in an organization?
How do control activities contribute to mitigating risks in an organization?
How do control activities contribute to mitigating risks in an organization?
What does an authorization signify in the context of control activities?
What does an authorization signify in the context of control activities?
Why is it essential for organizations to have control activities at various levels and stages within business processes?
Why is it essential for organizations to have control activities at various levels and stages within business processes?
Which of the following is NOT one of the main categories of computer controls mentioned in the text?
Which of the following is NOT one of the main categories of computer controls mentioned in the text?
What is the primary purpose of Input Controls?
What is the primary purpose of Input Controls?
Which of the following is NOT a characteristic of effective Application Controls, according to the text?
Which of the following is NOT a characteristic of effective Application Controls, according to the text?
What is the purpose of Segregation of Duties, as mentioned in the text?
What is the purpose of Segregation of Duties, as mentioned in the text?
What is the primary function of Computer Operations Controls?
What is the primary function of Computer Operations Controls?
Which type of controls are responsible for ensuring that computer hardware is physically secure and checking for equipment malfunction?
Which type of controls are responsible for ensuring that computer hardware is physically secure and checking for equipment malfunction?
What is the primary purpose of supervisory controls?
What is the primary purpose of supervisory controls?
Which of the following is an example of a physical control activity?
Which of the following is an example of a physical control activity?
What is the purpose of an entity's accounting information and communication system?
What is the purpose of an entity's accounting information and communication system?
Which principle relates to the communication of information within an organization?
Which principle relates to the communication of information within an organization?
What is the primary source of information used by management to support internal control?
What is the primary source of information used by management to support internal control?
Which of the following is NOT a transaction control activity mentioned in the text?
Which of the following is NOT a transaction control activity mentioned in the text?
What is the primary reason that input errors can lead to output errors in IT systems?
What is the primary reason that input errors can lead to output errors in IT systems?
Which of the following is NOT a common example of a data entry control?
Which of the following is NOT a common example of a data entry control?
Which of the following processing controls is used to ensure that data are complete and accurate during updating?
Which of the following processing controls is used to ensure that data are complete and accurate during updating?
What is the purpose of a $hash total$ in data entry controls?
What is the purpose of a $hash total$ in data entry controls?
What is the purpose of a $financial total$ in data entry controls?
What is the purpose of a $financial total$ in data entry controls?
Flashcards
Internal Control Components
Internal Control Components
Identifying and analyzing risks to achieving business objectives, and considering fraud potential.
Control Activities
Control Activities
Policies and procedures to ensure directives for risk mitigation are carried out.
General Control Activities
General Control Activities
Control activities over technology to support objective achievement.
Authorizations and Approvals
Authorizations and Approvals
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Reasonableness Checks
Reasonableness Checks
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Format Checks
Format Checks
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Existence Checks
Existence Checks
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Processing Controls
Processing Controls
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Run Control Totals
Run Control Totals
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Computer Matching
Computer Matching
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Programmed Edit Checks
Programmed Edit Checks
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Software Controls
Software Controls
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Hardware Controls
Hardware Controls
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Computer Operations Controls
Computer Operations Controls
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Data Security Controls
Data Security Controls
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Administrative Controls
Administrative Controls
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Application Controls
Application Controls
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Information and Communication
Information and Communication
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Accounting Information System
Accounting Information System
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Study Notes
Internal Control Components
- The organization identifies risks to the achievement of its objectives across the entity and analyzes risks to determine how to manage them.
- The organization considers the potential for fraud in assessing risks to the achievement of objectives.
Control Activities
- Control activities are actions established through policies and procedures to ensure management's directives to mitigate risks are carried out.
- Control activities are performed at all levels of the entity, at various stages within business processes, and over the technology environment.
- The organization selects and develops control activities that contribute to mitigating risks to acceptable levels.
- The organization selects and develops general control activities over technology to support the achievement of objectives.
Types of Control Activities
- Authorizations and approvals: an authorization affirms that a transaction is valid, representing an actual economic event.
- Other types of control activities include:
- Reasonableness checks
- Format checks
- Existence checks
- Financial totals
- Hash totals
- Record counts
Processing Controls
- Establish that data are complete and accurate during updating.
- Major processing controls include:
- Run control totals
- Computer matching
- Programmed edit checks
Software, Hardware, and Computer Operations Controls
- Software controls monitor the use of system software and prevent unauthorized access.
- Hardware controls ensure physical security and check for equipment malfunction.
- Computer operations controls ensure programmed procedures are consistently and correctly applied.
Data Security Controls and Administrative Controls
- Data security controls ensure valuable business data files are not subject to unauthorized access, change, or destruction.
- Administrative controls formalize standards, rules, procedures, and control disciplines to ensure proper execution and enforcement of internal controls.
Application Controls
- Application controls are specific to each computerized application, such as payroll, accounts receivable, and order processing.
- Application controls consist of both controls applied from the user functional area and from programmed procedures.
- Application controls fall into three categories: Input, Processing, and Output.
Information and Communication
- The organization obtains or generates and uses relevant and quality information from both internal and external sources to support internal control.
- The purpose of an accounting information and communication system is to initiate, record, process, and report transactions and maintain accountability for assets.
- Principles relating to information and communication:
- The organization obtains or generates and uses relevant, quality information.
- The organization internally communicates information necessary to support internal control.
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