8. Responses to Assessed Risks

Question 1

What is the primary advantage of a parallel simulation?

Answer 1

Any transaction during the period may be reprocessed.

Question 2

When automation leaves no visible audit trail, how would the auditor most likely test these controls?

Answer 2

Reviewing transactions submitted for processing and comparing them with related output.

Question 3

When numerous property and equipment transactions occur during the year, an auditor who assesses the risks of material misstatement at a low level usually performs

Answer 3

Tests of controls and limited tests of current-year property and equipment transactions.

Question 4

What is the test data approach?

Answer 4

The auditor prepares a set of dummy transactions specifically designed to test directly the effectiveness of the control activities that management claims to have incorporated into the processing programs.