Podcast Beta
Questions and Answers
Which of the following is a major audit planning activity?
What does RAP stand for in the context of audit procedures?
Which of the following is NOT a component of obtaining an understanding of the client and its environment?
What does 'non-compliance' refer to in the context of auditing?
Signup and view all the answers
Which of the following is NOT a category of RAP procedures?
Signup and view all the answers
What is the purpose of developing an overall audit strategy?
Signup and view all the answers
What is the purpose of preparing a Preliminary Audit Program?
Signup and view all the answers
Which of the following is NOT a reason why controls don't work?
Signup and view all the answers
What is the first step in the study and evaluation of internal controls?
Signup and view all the answers
What does PSA 315 require auditors to do?
Signup and view all the answers
When should the auditor perform tests of controls?
Signup and view all the answers
What is the nature of tests of control?
Signup and view all the answers
When should control risk be assessed as high?
Signup and view all the answers
What should the auditor do to address risks?
Signup and view all the answers
How should the auditor communicate weaknesses in the internal control system?
Signup and view all the answers
What is the expected learning outcome after studying this module?
Signup and view all the answers
Which one of these is NOT a category of objectives that internal control is designed to achieve?
Signup and view all the answers
What does an internal control system consist of?
Signup and view all the answers
Which one of these is NOT an element of the control environment?
Signup and view all the answers
What does commitment to competence refer to?
Signup and view all the answers
What is risk assessment?
Signup and view all the answers
Which one of these is NOT a component of information and communication control?
Signup and view all the answers
What do policies as means of control refer to?
Signup and view all the answers
Which one of the following statements about materiality is true?
Signup and view all the answers
Which of the following is true about the relationship between tolerable misstatement and audit procedures?
Signup and view all the answers
What is the purpose of performing analytical procedures during the planning stage of an audit?
Signup and view all the answers
When determining the need to use the work of an auditor's expert, what factors should the auditor consider?
Signup and view all the answers
What factors are considered when establishing the overall audit strategy?
Signup and view all the answers
What does the scope of an audit engagement include?
Signup and view all the answers
What does the focus of an audit engagement include?
Signup and view all the answers
Which of the following is NOT a major audit planning activity?
Signup and view all the answers
What is the purpose of risk assessment procedures (RAP)?
Signup and view all the answers
What does 'non-compliance' refer to in the context of auditing?
Signup and view all the answers
What does an internal control system consist of?
Signup and view all the answers
What is the purpose of performing preliminary analytical procedures during the planning stage of an audit?
Signup and view all the answers
Which of the following is NOT a category of risk assessment procedures (RAP)?
Signup and view all the answers
What does the overall audit strategy involve?
Signup and view all the answers
Which one of the following is NOT a component of internal control?
Signup and view all the answers
Which one of the following is NOT an element of the control environment?
Signup and view all the answers
Which one of the following is NOT a condition that may increase risk?
Signup and view all the answers
Which one of the following is NOT a component of information and communication control?
Signup and view all the answers
Which one of the following is NOT a component of control activities?
Signup and view all the answers
Which one of the following is NOT a limitation of internal control?
Signup and view all the answers
Which one of the following is NOT a component of policies as means of control?
Signup and view all the answers
Which of the following statements about materiality is true?
Signup and view all the answers
What is the purpose of performing analytical procedures during the planning stage of an audit?
Signup and view all the answers
When determining the need to use the work of an auditor's expert, what factors should the auditor consider?
Signup and view all the answers
What factors are considered when establishing the overall audit strategy?
Signup and view all the answers
What is the purpose of preparing a Preliminary Audit Program?
Signup and view all the answers
What does the scope of an audit engagement include?
Signup and view all the answers
What does the focus of an audit engagement include?
Signup and view all the answers
Which one of these is NOT a step in the study and evaluation of internal controls?
Signup and view all the answers
Which one of these is NOT a nature of tests of control?
Signup and view all the answers
Which one of these is NOT a substantive test procedure?
Signup and view all the answers
Which one of these is NOT a reason why control risk should be assessed as high?
Signup and view all the answers
Which one of these is NOT an overall response to address risks?
Signup and view all the answers
Which one of these is NOT a component of communication of weaknesses in the internal control system?
Signup and view all the answers
Which one of these is NOT a learning outcome after studying this module?
Signup and view all the answers
Which one of these is NOT a component of the control environment?
Signup and view all the answers
Which one of these is NOT a reason why controls don't work?
Signup and view all the answers
True or false: The lower the tolerable misstatement, the less extensive the required audit procedures.
Signup and view all the answers
True or false: Analytical procedures are only required to be performed in the planning stage of the audit.
Signup and view all the answers
True or false: The primary objective of performing analytical procedures in the planning stage of the audit is to identify areas of potential risk of material misstatements.
Signup and view all the answers
True or false: When determining the need to use the work of an auditor's expert, the auditor should evaluate the professional competence of the expert.
Signup and view all the answers
True or false: The establishment of the overall audit strategy involves determining the reporting objectives of the engagement.
Signup and view all the answers
True or false: The scope of an audit engagement includes the availability of the work of internal auditors.
Signup and view all the answers
True or false: An audit program is a list of procedures used to gather sufficient appropriate audit evidence.
Signup and view all the 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.
Signup and view all the answers
True or false: Risk Assessment Procedures (RAP) are designed to obtain an understanding of the entity and its environment, including the client's internal control.
Signup and view all the answers
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.
Signup and view all the answers
True or false: RAP procedures include inquiries, observation and inspection, and analytical procedures.
Signup and view all the answers
True or false: Obtaining an understanding of the client and its environment requires an understanding of the industry, regulatory and other external factors, as well as the entity's accounting policies and objectives.
Signup and view all the answers
True or false: Materiality is established during the planning stage of an audit to determine the level of misstatement that could influence the economic decisions of users.
Signup and view all the answers
True or false: The overall audit strategy involves developing a detailed audit plan and preparing a preliminary audit program.
Signup and view all the answers
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.
Signup and view all the answers
True or false: An internal control system consists of all the policies and procedures adopted by the management of an entity to assist in achieving management’s objective of ensuring the orderly and efficient conduct of its business.
Signup and view all the answers
True or false: The control environment is the foundation for all other components of internal control, providing discipline and structure.
Signup and view all the answers
True or false: Commitment to competence reflects the knowledge and skills needed to accomplish tasks that define the individual’s job.
Signup and view all the answers
True or false: Risk assessment is the identification and analysis of relevant risks to achievement of the company’s objectives.
Signup and view all the answers
True or false: Policies should be clearly stated in writing, systematically organized into handbooks, manuals, or other publications, and properly approved.
Signup and view all the answers
True or false: Internal control can ensure that all frauds will be detected.
Signup and view all the answers
True or false: The potential for human error is one of the reasons why controls may not work effectively.
Signup and view all the answers
True or false: Controls should be positioned before an expensive part of the project.
Signup and view all the answers
True or false: The auditor is required to obtain an understanding of the client's internal control system.
Signup and view all the answers
True or false: The auditor should make a preliminary assessment of control risk at the assertion level.
Signup and view all the answers
True or false: Tests of controls are performed when the auditor expects controls to be operating effectively.
Signup and view all the answers
True or false: Substantive procedures are performed for each material class of transactions, account balances, and disclosures.
Signup and view all the answers
True or false: Control risk should be assessed as high if policies and procedures are not pertaining to an assertion.
Signup and view all the answers
True or false: The auditor should communicate material weaknesses in the design or operation of the internal control system.
Signup and view all the answers
True or false: The students are expected to discuss the systematic approach in the study and evaluation of client's internal control system.
Signup and view all the answers
Study Notes
Audit Planning Activities
- Determining the overall audit strategy involves establishing the reporting objectives of the engagement and developing a detailed audit plan to reduce audit risk to an acceptably low level.
- Preparing a Preliminary Audit Program (PAP) involves listing procedures to gather sufficient appropriate audit evidence.
- Developing an overall audit strategy involves understanding the entity and its environment, including the client's internal control.
Understanding the Client and Its Environment
- Obtaining an understanding of the client and its environment requires an understanding of the industry, regulatory and other external factors, as well as the entity's accounting policies and objectives.
- 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.
Internal Control
- An internal control system consists of all the policies and procedures adopted by the management of an entity to assist in achieving management's objective of ensuring the orderly and efficient conduct of its business.
- The control environment is the foundation for all other components of internal control, providing discipline and structure.
- Commitment to competence reflects the knowledge and skills needed to accomplish tasks that define the individual's job.
- 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.
Risk Assessment
- Risk assessment is the identification and analysis of relevant risks to achievement of the company's objectives.
- Risk Assessment Procedures (RAP) are designed to obtain an understanding of the entity and its environment, including the client's internal control.
- RAP procedures include inquiries, observation and inspection, and analytical procedures.
- When determining the need to use the work of an auditor's expert, the auditor should evaluate the professional competence of the expert.
Control Activities
- Policies as means of control refer to clearly stated written policies, systematically organized into handbooks, manuals, or other publications, and properly approved.
- The control environment, risk assessment, control activities, information and communication, and monitoring are the components of internal control.
- Controls may not work effectively due to human error or other reasons.
Tests of Controls
- Tests of controls are performed when the auditor expects controls to be operating effectively.
- The nature of tests of control is to evaluate the operating effectiveness of controls.
- Control risk should be assessed as high if policies and procedures are not pertaining to an assertion.
Substantive Procedures
- Substantive procedures are performed for each material class of transactions, account balances, and disclosures.
- Analytical procedures are performed during the planning stage of an audit to identify areas of potential risk of material misstatements.
Communication of Weaknesses
- The auditor should communicate material weaknesses in the design or operation of the internal control system.
- The auditor should address risks by designing and performing audit procedures to respond to the assessed risks.
Materiality
- Materiality is established during the planning stage of an audit to determine the level of misstatement that could influence the economic decisions of users.
- The lower the tolerable misstatement, the less extensive the required audit procedures.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
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.