ISA 315 Control Activities and Internal Controls Quiz

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Questions and Answers

Which of the following is NOT considered a control activity according to ISA 315?

Organisational structure (correct)

Physical controls

Segregation of duties

Performance reviews

Which of the following is NOT an internal control?

The ordering of goods should not be the same person that can add supplier information to system

Authorising purchase orders

Ensuring cash is locked away

Performing external confirmation of receivables (correct)

The purpose of a walk-through test is to:

Provide assurance within a letter of representation

Serve as a checklist to see if all substantive tests have been performed

Confirm that the auditor's understanding of the internal control system is correct (correct)

Check that materiality levels are acceptable

Which of the following descriptions is correct?

Narrative notes are a list of questions about controls in a particular aspect of operations or accounting. They are designed to establish whether appropriate controls exist that meet specific control objectives. Signup and view all the answers

Which of the following is NOT a purpose of an internal control questionnaire?

To ask for feedback about job satisfaction and targets from staff Signup and view all the answers

What is the main purpose of performing a $ ext{walk-through test}$ during an audit?

To confirm that the auditor's understanding of the internal control system is correct Signup and view all the answers

According to the information provided, which of the following statements is correct regarding internal control questionnaires?

They are lists of questions designed to assess the existence and effectiveness of control objectives. Signup and view all the answers

Which of the following is NOT an expected internal control in a sales system?

All goods received notes (GRNs) are authorized by the customer Signup and view all the answers

Which of the following statements accurately describes a walk-through test?

It confirms the auditor's understanding of the internal control system. Signup and view all the answers

Based on the information provided, which of the following is NOT considered a control activity according to ISA 315?

Organizational structure Signup and view all the answers

Which of the following is NOT an expected internal control in a purchases system?

All invoices are grid-stamped to create the company's own invoice system Signup and view all the answers

Which of the following statements accurately describes an internal control?

Ensuring cash is locked away is an internal control. Signup and view all the answers

For which of the following situations would the auditor employ the services of an external expert, as per ISA 620?

Valuation of land and buildings Signup and view all the answers

According to the information provided, which of the following statements is NOT a purpose of an internal control questionnaire?

To request ideas for improving the internal control system from external auditors. Signup and view all the answers

Which of the following tangible non-current assets is typically not depreciated?

Land Signup and view all the answers

Which of the following details would NOT typically be included in a non-current asset register?

Capital allowances, disposal proceeds, supplier, location Signup and view all the answers

Based on the information given, which of the following statements is correct regarding performance reviews?

Performance reviews are considered control activities according to ISA 315. Signup and view all the answers

Which of the following is NOT a substantive test for the audit of non-current assets?

Reconcile the non-current assets register to the receivable's ledger control account Signup and view all the answers

Study Notes

Internal Control and Audit Concepts

Control activities are essential elements in the assessment of risks and internal controls, as defined in ISA 315.
Internal controls consist of processes and procedures designed to ensure accurate reporting, compliance, and operational efficiency.

Walk-Through Tests

A walk-through test is conducted during an audit to verify the understanding of a process by tracing transactions through existing controls.
It serves to identify gaps in controls and assess whether the design of the internal control system is effective.

Internal Control Questionnaires

Internal control questionnaires are tools used to evaluate the effectiveness of an organization's internal controls.
The purpose is typically to identify control weaknesses and ensure compliance with regulatory requirements.
Certain aims, such as merely collecting generic information, may not align with the intended purpose of the questionnaire.

Control Activities and Systems

Expected internal controls in sales and purchase systems include approval workflows, segregation of duties, and regular reconciliations.
Specific activities may not be classified as control activities, depending on the criteria laid out in ISA 315.

Use of Experts in Audits

As per ISA 620, auditors may need to consult external experts for specialized areas such as valuations, actuarial assessments, or complex financial instruments.

Non-Current Assets

Certain tangible non-current assets, like land, typically aren’t depreciated, as they generally do not lose value over time.
A non-current asset register should comprehensively detail acquisition costs, asset types, and useful lives but may exclude items like sale details or financial valuations.

Performance Reviews

Performance reviews help organizations assess the effectiveness of internal controls by comparing actual outcomes against expected performance.
This practice identifies areas for improvement and enhances accountability within the organization.

Substantive Tests for Non-Current Assets

Substantive tests focus on verifying asset existence and valuation; methods include confirmations and physical inspections.
Certain testing activities, such as those unrelated to asset valuation or existence, may not qualify as substantive tests.

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Description

Test your knowledge of control activities and internal controls based on ISA 315 standards. Identify examples of control activities and internal controls in various scenarios as per the ISA guidelines.