Table of Contents
What audit work is required for an auditor to assess low control risk?
5.61b What is required for an audit team to assess control risk below the maximum level? operating design and effectiveness of the client’s control activities.
What should an auditor use a risk assessment to determine?
Audit risk assessment procedures are performed to obtain an understanding of your company and its environment, including your company’s internal control, to identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error.
Which of the following types of evidence should an auditor most likely examine to determine whether internal controls are operating as designed?
To determine whether internal controls are operating as designed, an auditor would most likely collect client records documenting the use of EDP programs.
What should an auditor do when control risk is assessed at the maximum level?
When an auditor assesses control risk at the maximum level, the auditor is required to document: both the auditor’s understanding of the entity’s accounting system and the auditor’s basis for concluding that control risk is at the maximum level.
What are key controls in auditing?
A key control is an action your department takes to detect errors or fraud in its financial statements. It is expected that departments have their processes and controls documented. Your department should already have key financial review and follow-up activities in place. Those controls are working.
What risk can auditor control?
Detection risk occurs when an auditor fails to identify a material misstatement in a company’s financial statements. There are three types of audit risk: detection risk, inherent risk, and control risk. Auditors must implement correct audit procedures to limit detection risk.
How do auditors identify risk?
During the risk assessment process, Internal Auditing identifies and assesses both the likelihood and potential impact of various risks to the organization. Internal controls are then identified and evaluated to determine how adequate they are in reducing risk to ensure that residual risk is at manageable levels.
Why auditors need to perform risk assessment and what is the important of risk assessment in planning the audit?
Risk assessment is a key requirement of the planning phase of an audit. and assess the risks of material misstatement, whether due to error or fraud, at the financial statement and relevant assertion levels, which aids us in designing further audit procedures.
Which of the following steps should be performed first in applying analytical procedures?
Which of the following steps should be performed first in applying analytical procedures? Develop an expectation of a balance or ratio by using relationships that are expected to exist.
How do auditors respond to risk?
Auditor’s responses should focus on how the team will obtain evidence to reduce the risks identified to an acceptable level. Therefore, in relation to the risk of going concern, the response is to focus on performing additional going concern procedures, such as reviews of cash flow forecasts.
What should you do if risk control is high?
If the risk level is too high, the auditor conducts additional procedures to reduce the risk to an acceptable level. When the level of control risk and inherent risk is high, the auditor can increase the sample size for audit testing, thereby reducing detection risk.
What kind of testing is used in SOC Type 2 audit?
During either SOC Type 2 audit, the auditor walks through and tests each control objective or criteria with a specific type of testing method or procedure. There are five core testing methods that auditors use to confirm the facts and answers that a business wants to attain during an audit.
When to use sampling techniques in an audit?
Auditors usually use audit sampling techniques when performing the audit examination on the client’s financial statements. This is due to it is impractical for auditors to examine all items in the client’s record. Hence, audit procedures and sampling techniques are usually used together.
How are auditors required to assess the risk of fraud?
AUDITORS ARE REQUIRED TO specifically assess the risk of material misstatement of the financial statements due to fraud in every audit. The auditors assessment is a cumulative process that is ongoing throughout the audit.
How are audit procedures used in the test of controls?
In the test of controls, audit procedures are performed to obtain evidence about the effectiveness of the client’s internal control. On the other hand, audit procedures in the substantive procedures are performed to gather evidence about various audit assertions of different classes of transactions and account balances.