16 Questions
What assists the auditor in evaluating whether the entity’s process to monitor the entity's system of internal control is appropriate?
Understanding the sources of information used by the entity
Which external communications may indicate problems or highlight areas in need of improvement?
Customer complaints or regulator comments
Why could errors in the information used for monitoring potentially lead management to draw incorrect conclusions?
Because management does not have a basis for assuming that the information used is relevant and reliable
What assists the auditor in evaluating whether the entity's process for monitoring the system of internal control is appropriate considering the nature and complexity of the entity?
The sources of information used by the entity in monitoring the entity's system of internal control
What could potentially lead management to draw incorrect conclusions from its monitoring activities?
Assuming that information used for monitoring is relevant and reliable without a basis for that assumption
What could potentially assist the auditor in evaluating whether the entity’s process for monitoring the system of internal control is appropriate?
Understanding the sources of information used by the entity in monitoring
What is the purpose of the auditor's evaluation of the entity’s process to monitor the system of internal control?
To identify and assess financial statement level risks of material misstatement
How does the monitoring of the system of internal control differ from the measurement and review of financial performance?
Monitoring is directed at whether business performance is meeting objectives, but measurement and review are concerned with identifying control deficiencies
Why is it a matter of judgment whether a supervisory review is classified as a control related to the information system or a monitoring activity?
Because supervisory reviews are not automatically classified as monitoring activities
What is the difference between a monitoring activity and a control related to the information system?
Monitoring activities aim to detect and correct errors, while controls related to the information system focus on preventing future errors
In what way does the evaluation of the appropriateness of the entity’s process to monitor the system of internal control assist the auditor?
By identifying and assessing financial statement level risks of material misstatement
What does the auditor's evaluation assist in understanding about the other components of the entity’s system of internal control?
Whether other components are present and functioning
Why may performance indicators also provide information that enables management to identify control deficiencies?
Because they involve automated reports of unusual activity to management
How are controls related to the entity's process to monitor the entity's system of internal control classified?
As manual or automated, or a combination of both
What distinguishes a monitoring activity from a control related to the information system?
Monitoring activities detect and correct errors, while controls focus on preventing future errors
What assists the auditor in understanding whether other components of the entity’s system of internal control are present and functioning?
The entity’s process to monitor the system of internal control
This quiz focuses on understanding the sources of information used by management to monitor the system of internal control and how management determines the reliability of such information. It may include topics such as using external communications like customer complaints or regulator comments for monitoring activities.
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