Test of controls

What is the purpose of a test of controls in an audit?

• To assess the overall financial health of the company
• To evaluate the effectiveness of internal controls in preventing or detecting material misstatements
• To determine the accuracy of financial statements
• To identify potential fraud within the organization

What are indirect controls, and why might auditors need to obtain evidence supporting their effective operation?

• Indirect controls are controls that operate automatically without human intervention.
• Auditors need evidence for indirect controls to ensure compliance with legal requirements.
• Indirect controls may include IT general controls or controls over data accuracy
• Auditors do not typically test indirect controls

Which of the following statements is true regarding the nature of audit procedures relevant to tests of controls?

• Inquiry alone is sufficient to obtain audit evidence about operating effectiveness.
• Observation provides audit evidence continuously throughout the audit period.
• Inspection is the process of asking for an explanation from the client.
• Reperformance is a type of test that assesses the design of controls

What is the purpose of performing tests of controls at an interim date?

• To assess the overall financial health of the company
• To evaluate the effectiveness of internal controls
• To determine the accuracy of financial statements
• To identify potential fraud within the organization

Which type of control may be suitable for audit evidence pertaining only to a point in time?

• Controls related to financial reporting
• Automated controls
• Pervasive controls
• Supervisory controls

What determines the extent of tests of controls in an audit?

• The audit evidence sought from operating effectiveness
• The frequency with which the control operates
• The expected rate of deviation
• All of the above

What is the key difference between an interim strategy and an advanced strategy for testing controls?

• The timing of when the tests are performed
• The extent of tests of controls
• The use of roll-forward procedures
• The reliance on IT general controls

If there have been significant personnel changes affecting the application of a control, what should auditors consider? and an advanced strategy for testing controls?

• Whether the control is still relevant
• Whether the lack of a change in the control poses a risk due to changing circumstances
• Whether the control is manual or automated
• All of the above

Which of the following is not a consideration when assessing the effectiveness of a control?

• Whether the control is manual or automated
• The nature and extent of deviations in the application of the control noted in previous audits
• The risks of material misstatement
• The entity's risk assessment process

When deviations from controls being relied on are detected, what should auditors do?

• Ignore the deviations and proceed with substantive procedures
• Make specific inquiries to understand the deviations and their potential consequences
• Rely solely on the existing controls without further investigation
• Disregard the deviations and focus on the overall control environment