ACCT 415 CH 12 | Questions and Answers 2024
2. obtain and document understanding internal control and assessing control risk:
3. require auditors to obtain and document their understanding of internal control for every audit.
It is necessary for both the audit of and the audit of .
Th...
1. What are the 4 steps in the process for understanding internal control and assessing control
risk?: Obtain and document understanding of internal control design and operation
Assess control risk
Design, perform, and evaluate tests of controls Decide
planned detection risk and substantive tests
2. obtain and document understanding internal control and assessing control risk:
3. require auditors to obtain and
document their understanding of internal control for every audit.
It is necessary for both the audit of
and the audit of .
The main source of understanding comes from mgmt's documentation.: audit- ing standards
internal controls
financial statement
4. As part of the auditor's
, the auditor uses
procedures to obtain an understanding, which involve gathering evidence about the design and
implementation of internal control and using this info to assess control risk.: risk assessment
procedures
5. What are the four main types of evidence used for understanding?: inspec- tion
inquiry
observation
reperformance
6. What are 3 types of documents used to obtain and document the auditor's understanding of the
design of internal control?: narrative
flowchart
internal control questionaire
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, ACCT 415 CH 12 | Questions and Answers 2024
7. written description of a client' s internal controls.: narrative
8. A proper narrative covers the following four things:: the origin the processing
the disposition
an indication of the controls relevant to the assessment of control risk.
9. is a diagram of the client's documents and their sequential flow in the company.
And includes the same 4 items as listed for narrative.
They provide an overview of the system and help the auditor identify controls and deficiencies:
flowchart
10.What are two advantages flowcharts have over narratives?: flowchart is easier to read and
update
11. asks a series of questions about the controls in each audit area as a means of identifying
internal control deficiencies.
Most require a yes or no response, and a no indicates a potential internal control deficiency.
Can also serve as a checklist to remind auditors of the different types of internal controls: internal
control questionnaire
12.What are two disadvantages of internal control questionaries?: they dont provide an overview
of the system
theyre not applicable to all audits
13.In addition to understanding, the auditor must also evaluate if the designed controls are .:
implemented
14.In practice, understanding of design and implementation are often done simultaneously using
one of the following common methods: (5): Update and evaluate auditor's previous experience
with the entity
-review previous audit year files to see if any deficient controls have been improved.
Make inquiries of client personnel
-ask mgmt. and others to explain their duties.
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