AU 12 - Tests of Controls

Question 1

5 elements of the internal control system

Answer 1

• control environment
• entitiy’s risk assessment process
• entity’s process to monitor system of internal control
• information system and communication
• control activities

Question 2

Define direct controls

Answer 2

Controls that are precise enough to address risks of material misstatement at the assertion level

Question 3

Define indirect controls

Answer 3

Controls that are not precise to prevent, detect or correct misstatements at assertion level but supplement other controls. Usually in place at OFSL level.

Question 4

4 layers of general IT controls

Answer 4

Apps
Database
Operating system
Network