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Questions and Answers
True or false: Planning an audit involves establishing the overall audit strategy for the engagement and developing a detailed audit plan, in order to reduce audit risk to an acceptably low level.
True
True or false: Risk Assessment Procedures (RAP) are a major category of audit procedures designed to obtain an understanding of the entity and its environment, including the client's internal control.
True
True or false: Assessing the possibility of non-compliance refers to acts of omission or commission by the entity being audited, either intentional or unintentional, which are contrary to the prevailing laws or regulations.
True
True or false: The lower the tolerable misstatement, the less extensive the required audit procedures.
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True or false: Analytical procedures are only required to be performed in the planning stage of the audit.
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True or false: The auditor should evaluate the professional competence of an expert by considering their professional certification or licensing.
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True or false: The establishment of the overall audit strategy involves determining the scope, timing, and focus of the engagement.
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True or false: The potential for human error is one of the reasons why controls don't work.
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True or false: Controls should be positioned where they are least effective.
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True or false: The auditor should obtain an understanding of the client's internal control system.
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True or false: Tests of controls are performed to obtain audit evidence that the controls were operating effectively.
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True or false: Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives in the categories of effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.
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True or false: The control environment is the foundation for all other components of internal control.
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True or false: Competence should reflect the knowledge and skills needed to accomplish tasks that define an individual's job.
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True or false: Internal control can ensure that all frauds will be detected.
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Study Notes
Planning an Audit
- Planning an audit involves establishing the overall audit strategy for the engagement and developing a detailed audit plan to reduce audit risk to an acceptably low level.
Risk Assessment Procedures (RAP)
- Risk Assessment Procedures (RAP) are a major category of audit procedures designed to obtain an understanding of the entity and its environment, including the client's internal control.
Non-Compliance
- Assessing the possibility of non-compliance refers to acts of omission or commission by the entity being audited, either intentional or unintentional, which are contrary to the prevailing laws or regulations.
Audit Procedures
- The lower the tolerable misstatement, the more extensive the required audit procedures.
Analytical Procedures
- Analytical procedures can be performed in various stages of the audit, not only in the planning stage.
Expert Evaluation
- The auditor should evaluate the professional competence of an expert by considering their professional certification, licensing, and other factors.
Audit Strategy
- The establishment of the overall audit strategy involves determining the scope, timing, and focus of the engagement.
Controls
- The potential for human error is one of the reasons why controls don't work.
- Controls should be positioned where they are most effective.
Internal Control
- The auditor should obtain an understanding of the client's internal control system.
- Tests of controls are performed to obtain audit evidence that the controls were operating effectively.
- Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives in the categories of effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.
Control Environment
- The control environment is the foundation for all other components of internal control.
Competence
- Competence should reflect the knowledge and skills needed to accomplish tasks that define an individual's job.
Internal Control Limitations
- Internal control cannot ensure that all frauds will be detected.
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Description
Test your knowledge on internal control with this quiz! Learn about the key objectives and components of internal control, and assess your understanding of its role in ensuring operational effectiveness, reliable financial reporting, and compliance.
