A2 Quality Control, Engagement Accept, Plan, and IC

Question 1

“HELP ME” What are the Six Interrelated Elements of Quality Control?

Answer 1

Human Resources

Engagement/client acceptance and continuance

Leadership Responsibilities

Performance of the Engagement

Monitoring

Ethical Requirements

Question 2

What are the six main financial statement assertions imposed by management? “COVERU”

Answer 2

Completeness

O cutOff

Valuation, Allocation, and Accuracy

Existence and Occurrence

Rights and Obligations

Understandability and Presentation: Proper terminology and coded to proper accounts.

Question 3

• What are the five components of Internal Control (Crime)?
• What are the 8 principles of Existing Control Activity (PAID TIPS)?
• What are the 3 principles of Segregation of Duties (ARC)? : “The ARC that keeps you from a flood of trouble”
• What is the Enhanced Segregation of duties for IT? (COPAL)

Answer 3

Control Environment

Risk Assessment

Information and Communication Systems

Monitoring

Existing Control Activities

What are the eight elements of “_E”_xisting Control Activities?

Prenumbered transactions

Authorization of transactions

Independent checks to maintain asset accountability

Documentation

Timely and Appropriate Financial Performance Reviews

Information Processing Controls

Physical Controls for Safeguarding Assets

Segregation of Duties

What are the three elements of “_S”_egregation of Duties?

Authority

Recordkeeping

Custody

The IT area must segregate the duties of COPAL!

Control Group

Operator

Programmers

Analysts (Systems)

Librarian

Question 4

“NET” What are the three elements of planning and performing the whole audit?

Answer 4

Cast your NET around the whole audit process by carefully analyzing:

Nature

Extent

Timing

each step of the way

Question 5

“PAI “D” TIPS” Documentation meaning “FIND”

What are the four elements to document the auditors understanding of managements internal controls? “FIND”

Answer 5

Flowcharts

Internal control questionnaires

Narratives

Documentation from the client

Question 6

2 of the 5 audit procedures for IT

What are some IT procedures acronyms? CAAT’s and GASP’s

Answer 6

CAAT’s

Computer Assisted Audit Techniques (5 components):

1. Transaction Tagging (audit through the clients system)
2. Embedded Audit Modules: ex. audit ALL transactions of a class
3. Test Data: Compare results OFF-LINE (benefit) Under the Auditors Control
4. Integrated Test Facility: ON-LINE comingled with live data, client does not know monitoring.
5. Parallel Simulation: Reperformance test, compare actual process runs of transactions with reprocessed archived runs in client files.

GASP’s

Generalized Audit Software Packages

Allows the auditor to perform test of controls and substantive test on clients system at one time.

ADVANTAGES:

• Test much higher data percentage at once
• little technical knowledge of client’s hardware and software is required.