A2 Understanding Control Environment

Question 1

System of Internal Controls

Answer 1

These are policies, procedures, and activities designed to reduce risks. CRIME provide a framework for controls.

Question 2

Testing

Answer 2

An auditor is required to test the design & implementation of controls that address risks of MM at an assertion level

Question 3

Preventative Controls

Answer 3

Only valid transactions are approved before processing activities.

Question 4

Detective Controls

Answer 4

These provide reasonable assurance that errors/irregularities are discovered & corrected on a timely basis.

Question 5

Technology Controls

Answer 5

Includes Manual and automated control. Manual controls are performed by people. Automated controls are used when there are high volume or reoccurring transactions.

Question 6

General IT Controls

Answer 6

Policies & procedures that relate to many applications and support the effective functioning of IT system.

Question 7

Information Processing Controls

Answer 7

Ensure the integrity of the data in an entity’s IT system.

Question 8

Walkthroughs

Answer 8

Traces the flow of transactions from inception through recording in the GL & presented on the financials.