As the acceptable level of detection risk decreases Substantive tests an

As the acceptable level of detection risk decreases

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As the acceptable level of detection risk decreases (Substantive tests), an auditor may change the a. Timing of substantive tests by performing them at an interim date rather than at year-end. (Down) – opposite would be up b. Nature of substantive tests from a less effective to a more effective procedure. (Up) c. Timing of tests of controls by performing them at several dates rather than at one time. CR d. Assessed level of inherent risk to a higher amount. IR 2
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Based on evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, an auditor might: (CR increase, PDR down, Evidence up) AAR = IR x CR x PDR (independent variables) PDR = AAR / IR x CR a. Decrease inherent risk. b. Decrease materiality levels . (increase evidence) c. Decrease substantive testing. (wrong direction) d. Increase detection risk. (wrong direction) Chapter 11 Objectives and limitations of internal control COSO elements of internal control Control activities Which of the following is not an element of the internal control structure: a. Control environment. b. Control risk. c. Control procedures. d. Accounting system. An auditor would most likely review an entity's periodic accounting for the numerical sequence of shipping documents and invoices to support management's assertion of a. Existence or occurrence. b. Rights and obligations. c. Valuation or allocation. d. Completeness. – usually prenumbered documents = completeness 3
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Problem 2 Sample Exam - COSO control framework For each control, indicate which of the five COSO internal control components is best represented by each internal control. a. Control environment b. Risk assessment c. Control activities d. Information and communication – accounting system e. Monitoring Control COSO Element 1. The accounts receivable clerk reconciles the accounts receivable subsidiary ledger to the accounts receivable general ledger account on a monthly basis.
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  • Spring '14
  • AmbroseJones

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