AUD 3 Internal Control 10 - 5 Flashcards

Question 1

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

An auditor performs the following procedures to obtain and apply an understanding of internal control to an audit:

Step 1 – Obtain an understanding of the design of all 5 components of the entity’s internal control (CRIME) through the performance of risk assessment procedures.

Step 2 – Document the understanding of Internal Control.

Step 3 – Assess Risk of Material Misstatement (RMM) which consists of inherent risk (IR) and control risk (CR).
RMM = IR × CR

Step 4 – Develop an audit strategy to either:
o (RELY?)
Perform tests of control (TofC) to determine if CR is below maximum, reducing RMM below the level of IR and allowing for the modification of the nature, timing, and extent of further audit procedures (sub tests): or
o (NOT Rely)
Decide NOT to perform tests of controls, assessing CR at the maximum level as if the control did not exist, and measuring RMM as being equal to IR.

Step 5 – Reassess Risk of Material Misstatement and evaluate results.
o For controls for which tests of controls were performed, evaluate results to reassess RMM and determine if it is appropriate to modify the nature, timing, and extent of further audit procedures.

Step 6 – Document conclusions and determine the effect on the planned substantive procedures. At this point, the audit program needs to be developed or revised for further audit procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

An auditor performs the following procedures to obtain and apply an understanding of internal control to an audit:

Step 1 – Obtain an understanding of the design of all 5 components of the entity’s internal control (CRIME) through the performance of risk assessment procedures.

Step 2 – Document the understanding of Internal Control.

Step 3 – Assess Risk of Material Misstatement (RMM) which consists of inherent risk (IR) and control risk (CR).
RMM = IR × CR

Step 4 – Develop an audit strategy to either:
o (RELY?)
Perform tests of control (TofC) to determine if CR is below maximum, reducing RMM below the level of IR and allowing for the modification of the nature, timing, and extent of further audit procedures (sub tests): or
o (NOT Rely)
Decide NOT to perform tests of controls, assessing CR at the maximum level as if the control did not exist, and measuring RMM as being equal to IR.

Step 5 – Reassess Risk of Material Misstatement and evaluate results.
o For controls for which tests of controls were performed, evaluate results to reassess RMM and determine if it is appropriate to modify the nature, timing, and extent of further audit procedures.

Step 6 – Document conclusions and determine the effect on the planned substantive procedures. At this point, the audit program needs to be developed or revised for further audit procedures.

Question 2

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 – Reassess Risk of Material Misstatement and evaluate results.

       o For controls for which tests of controls were performed, evaluate results to reassess RMM and determine if it is appropriate to modify the nature, timing, and extent of further audit procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 – Reassess Risk of Material Misstatement and evaluate results.

       o For controls for which tests of controls were performed, evaluate results to reassess RMM and determine if it is appropriate to modify the nature, timing, and extent of further audit procedures.

Question 3

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will dete_____ whether it is necessary to modify the scope of substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Question 4

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to mo___y the scope of substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Question 5

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the re____s of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Question 6

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the t___s of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Question 7

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the sc___ of substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Question 8

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is ne_____ary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Question 9

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If t___s of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Question 10

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as ex____ed, there will generally be no need to change the scope of planned substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Question 11

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be n_ need to change the scope of planned substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Question 12

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the sc___ of planned substantive procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Question 13

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned subs_______ procedures.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Question 14

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does n__ operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Question 15

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as ex____ed, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Question 16

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of subs_______ procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Question 17

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will incr____

(thereby decreasing detection risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Question 18

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby dec____ing detection risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Question 19

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing dete_____ risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase

(thereby decreasing detection risk).

Question 20

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will incr_____ (thereby decreasing detection risk).

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase (thereby decreasing detection risk).

Question 21

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase (thereby decreasing detection risk).

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase (thereby decreasing detection risk).

• DR tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR

Question 22

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase (thereby decreasing detection risk).

• DR tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR

Question 23

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you h__ mu__ substantive testing to do

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

Question 24

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much subst_____ testing to do

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

Question 25

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive t___ing to do

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

Question 26

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• De_______ R___ (DR) tells you how much substantive testing to do

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

Question 27

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do subst_______ testing
(adjust Audit Program for Substantive tests)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

Question 28

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Mu__ do substantive testing
(adjust Audit Program for Substantive tests)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

Question 29

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adj___ Audit Program for Substantive tests)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

Question 30

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• Detection Risk (DR) tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Question 31

Q

• AR / (IR × CR) = \_\_
   or
   AR = (IR × CR)  x  \_\_ 
   or
   \_\_ = AR / (IR × CR)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Question 32

Q

• \_\_ / (IR × CR) = DR
   or
   \_\_ = (IR × CR)  x  DR 
   or
   DR = \_\_ / (IR × CR)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Question 33

Q

• AR / (\_\_ × CR) = DR
   or
   AR = (\_\_ × CR)  x  DR 
   or
   DR = AR / (\_\_ × CR)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Question 34

Q

• AR / (IR × \_\_) = DR
   or
   AR = (IR × \_\_)  x  DR 
   or
   DR = AR / (IR × \_\_)

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• AR / (IR × CR) = DR
   or
   AR = (IR × CR)  x  DR 
   or
   DR = AR / (IR × CR)

Question 35

Q

• AR = (__ × __) x DR

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• AR = (IR × CR) x DR

Question 36

Q

• AR = (IR × CR) x __

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

• AR = (IR × CR) x DR

Question 37

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to r___ on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Question 38

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are per____ed to determine if the controls were working effectively as they were designed for the period under audit.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Question 39

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working eff______ly as they were designed for the period under audit.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Question 40

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to det_______ if the controls were working effectively as they were designed for the period under audit.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Question 41

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were de____ed for the period under audit.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Question 42

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the pe____ under audit.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

Question 43

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are eff______,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Question 44

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of co_____s, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Question 45

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be red___d.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Question 46

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of fur____ audit procedures in relation to that assertion will be reduced.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Question 47

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit pro_____es in relation to that assertion will be reduced.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are effective,

the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Question 48

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor can___ conclude that the controls are effective,

CR will be reset to maximum

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

CR will be reset to maximum

Question 49

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor can___ conclude that the controls are eff______,

CR will be reset to maximum

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

CR will be reset to maximum

Question 50

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

CR will be re___ to maximum

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

CR will be reset to maximum

Question 51

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

CR will be reset to maxi___
and the auditor will develop an audit program to test the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

CR will be reset to maximum
and the auditor will develop an audit program to test the assertion

Question 52

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control r___ will be reset to maximum
and the auditor will develop an audit program to test the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion

Question 53

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will deve\_\_ an audit program to test the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion

Question 54

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to t\_\_\_ the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion

Question 55

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the ass\_\_\_\_\_ 
applying substantive audit procedures as if there were no controls related to the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying substantive audit procedures as if there were no controls related to the assertion

Question 56

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying subst\_\_\_\_\_\_\_ audit procedures as if there were no controls related to the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying substantive audit procedures as if there were no controls related to the assertion

Question 57

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
ap\_\_\_ing substantive audit procedures as if there were no controls related to the assertion

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying substantive audit procedures as if there were no controls related to the assertion

Question 58

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum
and the auditor will develop an audit program to test the assertion
applying substantive audit procedures as if there were n_ controls related to the asse_____
and as if no test of controls had been performed.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying substantive audit procedures as if there were no controls related to the assertion 
and as if no test of controls had been performed.

Question 59

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying substantive audit procedures as if there were no controls related to the assertion 
and as if n_ test of controls had been performed.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion 
applying substantive audit procedures as if there were no controls related to the assertion 
and as if no test of controls had been performed.

Question 60

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the con____s are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion applying substantive audit procedures as if there were no controls related to the assertion 
and as if no test of controls had been performed.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion applying substantive audit procedures as if there were no controls related to the assertion 
and as if no test of controls had been performed.

Question 61

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot con_____ that the controls are effective,

control risk (CR) will be reset to maximum and the auditor will develop an audit program to test the assertion applying substantive audit procedures as if there were no controls related to the assertion and as if no test of controls had been performed.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, however, based on the tests of controls, the auditor cannot conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion applying substantive audit procedures as if there were no controls related to the assertion and as if no test of controls had been performed.

Question 62

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are EFFECTIVE, the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

If, however, based on the tests of controls, the auditor canNOT conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion applying substantive audit procedures as if there were NO controls related to the assertion and as if no test of controls had been performed.

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

When an auditor decides to rely on controls,

tests of controls are performed to determine if the controls were working effectively as they were designed for the period under audit.

If, based on the tests of controls, the auditor concludes that the controls are EFFECTIVE, the nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

If, however, based on the tests of controls, the auditor canNOT conclude that the controls are effective,

control risk (CR) will be reset to maximum 
and the auditor will develop an audit program to test the assertion applying substantive audit procedures as if there were NO controls related to the assertion and as if no test of controls had been performed.

Question 63

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expen___ and inefficient alternative is to perform tests of controls,

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls,

Question 64

Q

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and ineffi_____ alternative is to perform tests of controls, only to determine that the controls are not reliable,

Answer

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

Answer 65

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

Answer 66

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

Answer 67

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

Answer 68

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

Answer 69

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

Answer 70

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

Answer 71

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable,

the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

In performing the analysis:

• The auditor will estimate the cost of performing a substantive audit without performing tests of controls.

Answer 72

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

• The auditor will estimate the cost of performing a substantive audit without performing tests of controls.

Answer 73

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

• The auditor will estimate the cost of performing a substantive audit without performing tests of controls.

Answer 74

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

• The auditor will estimate the cost of performing a substantive audit without performing tests of controls.

Answer 75

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

• The auditor will estimate the cost of performing a substantive audit without performing tests of controls.

Answer 76

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing a substantive audit without performing tests of controls.
The auditor will estimate the cost of performing tests of controls.

Answer 77

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing a substantive audit without performing tests of controls.
The auditor will estimate the cost of performing tests of controls.

Answer 78

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

• The auditor will estimate the cost of performing tests of controls.

Answer 79

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing tests of controls.
The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.

Answer 80

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing tests of controls.
The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.

Answer 81

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing tests of controls.
The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.

Answer 82

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing tests of controls.
The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.

Answer 83

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 84

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 85

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 86

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 87

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 88

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing a substantive audit without performing tests of controls.
The auditor will estimate the cost of performing tests of controls.
The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 89

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Since the most expensive and inefficient alternative is to perform tests of controls, only to determine that the controls are not reliable, the auditor will do a cost/benefit analysis before deciding to perform tests of controls.

In performing the cost/benefit analysis:

The auditor will estimate the cost of performing a substantive audit without performing tests of controls.
The auditor will estimate the cost of performing tests of controls.
The auditor also estimate the cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
Finally, the auditor will estimate the likelihood that the controls to be tested are likely to be effective.

Answer 90

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing

and multiply the total by the probability that the controls will be effective.

Answer 91

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing

and multiply the total by the probability that the controls will be effective.

Answer 92

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing

and multiply the total by the probability that the controls will be effective.

Answer 93

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing
and multiply the total by the probability that the controls will be effective.

Answer 94

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing
and multiply the total by the probability that the controls will be effective.

Answer 95

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing
and multiply the total by the probability that the controls will be effective.

Answer 96

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing
and multiply the total by the probability that the controls will be effective.

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 97

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing
and multiply the total by the probability that the controls will be effective.

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 98

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 99

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 100

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 101

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 102

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 103

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Answer 104

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing
and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

Answer 105

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing
and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

Answer 106

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing
and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

Answer 107

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing
and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

Answer 108

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing
and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

Answer 109

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing

and multiply the total by the probability that the controls will be effective.

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

The lower of the two amounts will determine the strategy to be taken.

Answer 110

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:
The auditor will then:

• Add the cost of performing tests of controls to the cost of reduced substantive testing

and multiply the total by the probability that the controls will be effective.

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing

and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

The lower of the two amounts will determine the strategy to be taken.

Answer 111

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The lower of the two amounts will determine the strategy to be taken.

Answer 112

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The lower of the two amounts will determine the strategy to be taken.

Answer 113

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In performing the cost/benefit analysis:

The lower of the two amounts will determine the strategy to be taken.

Answer 114

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

Answer 115

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

Answer 116

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

Answer 117

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be reduced but will not be eliminated.

Answer 118

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be reduced but will not be eliminated.

Answer 119

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be reduced but will not be eliminated.

Answer 120

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be REDUCED but will NOT be ELIMINATED.

Answer 121

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are NOT normally considered SUFFICIENT evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be REDUCED but will NOT be ELIMINATED.

Answer 122

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are NOT normally considered SUFFICIENT evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be REDUCED but will NOT be ELIMINATED.

In many cases, the auditor will use DUAL purpose testing,

Answer 123

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are NOT normally considered SUFFICIENT evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be REDUCED but will NOT be ELIMINATED.

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 124

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are NOT normally considered SUFFICIENT evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be REDUCED but will NOT be ELIMINATED.

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 125

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 126

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 127

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 128

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 129

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 130

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be reduced but will not be eliminated.

In many cases, the auditor will use DUAL purpose testing,

which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 131

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 132

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 133

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 134

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 135

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 136

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 137

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are satisfactory,

the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.

Answer 138

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

When the results are satisfactory, the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.
When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 139

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

When the results are satisfactory, the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing.
When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 140

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 141

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 142

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 143

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 144

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are not satisfactory,

the auditor will conclude that the control may not be relied upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 145

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

In many cases, the auditor will use DUAL purpose testing.

• When the results are SATISFACTORY,

the auditor will conclude that the control may be relied upon and the evidence obtained is SUFFICIENT to support the assertion, eliminating the need for further testing.

• When the results are NOT satisfactory,

the auditor will conclude that the control may NOT be RELIED upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 146

A

Obtain an Understanding of the Entity’s Internal Control Structure (AU-C 315)

Step 5 –
5. Reassess RMM to Determine DR

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

As a result, even when tests of controls prove that controls can be relied upon, further audit procedures may be reduced but will not be eliminated.

In many cases, the auditor will use dual purpose testing, which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

• When the results are SATISFACTORY,

the auditor will conclude that the control may be relied upon and the evidence obtained is SUFFICIENT to support the assertion, eliminating the need for further testing.

• When the results are NOT satisfactory,

the auditor will conclude that the control may NOT be RELIED upon and will determine the nature, timing, and extent of further audit procedures that will be necessary to support the assertion.

Answer 147

A

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Answer 148

A

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Answer 149

A

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Answer 150

A

Based on the results of the tests of controls the auditor will determine whether it is necessary to modify the scope of substantive procedures.

Answer 151

A

Will there generally be the need to change the scope of planned substantive procedures, if tests of control reveal that the system operates as expected?

No Need to change the scope

If tests of control reveal that the system operates as expected, there will generally be no need to change the scope of planned substantive procedures.

Answer 152

A

Will there be the need to change the scope of planned substantive procedures, if tests of control reveal that the system does NOT operate as effectively as expected?

Yes.
The scope of substantive procedures for the relevant assertions involved will increase.
(thereby decreasing detection risk)

Conversely, if the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase (thereby decreasing detection risk).

• DR tells you how much substantive testing to do

• Must do substantive testing
(adjust Audit Program for Substantive tests)

• AR / (IR × CR) = DR

Answer 153

A

Detection risk (DR) tells you how much substantive testing to do.

Answer 154

A

Detection risk (DR) tells you how much substantive testing to do.

Answer 155

A

Detection risk (DR) tells you how much substantive testing to do.

Answer 156

A

DR = AR / (IR × CR)

Answer 157

A

DR = AR / (IR × CR)

Answer 158

A

DR = AR / (IR × CR)

Answer 159

A

DR = AR / (IR × CR)

Answer 160

A

AR / (IR × CR) = DR

Answer 161

A

AR / (IR × CR) = DR

Answer 162

A

AR / (IR × CR) = DR

Answer 163

A

AR / (IR × CR) = DR

Answer 164

A

AR = (IR × CR) x DR

Answer 165

A

AR = (IR × CR) x DR

Answer 166

A

AR = (IR × CR) x DR

Answer 167

A

AR = (IR × CR) x DR

Answer 168

A

If the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase.

Answer 169

A

If the system does not operate as effectively as expected, the scope of substantive procedures will increase.

Answer 170

A

If the system does not operate as effectively as expected, the scope of substantive procedures for the relevant assertions involved will increase.

Answer 171

A

Increase the scope of substantive procedures
for the relevant assertion

= decreasing detection risk

Answer 172

A

Increase the scope of substantive procedures
for the relevant assertion

= decreasing detection risk

Answer 173

A

Increase the scope of substantive procedures
for the relevant assertion

= decreasing detection risk

Answer 174

A

Increase the scope of substantive procedures
for the relevant assertion

= decreasing detection risk

Answer 175

A

Decreasing detection risk = Increase the scope of substantive procedures

Answer 176

A

Decreasing detection risk = Increase the scope of substantive procedures

Answer 177

A

Decreasing detection risk = Increase the scope of substantive procedures

Answer 178

A

Decreasing detection risk = Increase the scope of substantive procedures

Answer 179

A

When an auditor decides to rely on controls,

tests of controls are performed

to determine if the controls were working effectively as they were designed for the period under audit.

Answer 180

A

When an auditor decides to rely on controls,

tests of controls are performed

to determine if the controls were working effectively as they were designed for the period under audit.

Answer 181

A

When an auditor decides to rely on controls,

tests of controls are performed

to determine if the controls were working effectively as they were designed for the period under audit.

Answer 182

A

When an auditor decides to rely on controls,

tests of controls are performed

to determine if the controls were working effectively as they were designed for the period under audit.

Answer 183

A

When an auditor decides to rely on controls,

tests of controls are performed

to determine if the controls were working effectively as they were designed for the period under audit.

Answer 184

A

When an auditor decides to rely on controls,

tests of controls are performed

to determine if the controls were working effectively as they were designed for the period under audit.

Answer 185

A

Why tests of controls are performed?

To determine if the controls were working effectively as they were designed for the period under audit.

Answer 186

A

What will happen if, based on the tests of controls, the auditor concludes that the controls are effective?

The nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Answer 187

A

What will be reduced if, based on the tests of controls, the auditor concludes that the controls are effective?

The nature, timing, and extent of further audit procedures in relation to that assertion will be reduced.

Answer 188

A

What will happen if, based on the tests of controls, the auditor cannot conclude that the controls are effective?

Control risk (CR) will be reset to maximum
The auditor will develop an audit program to test the assertion
Applying substantive audit procedures as if there were no controls related to the assertion and as if no test of controls had been performed.

Answer 189

A

When does the auditor perform a cost/benefit analysis related to deciding to perform tests of controls?

The auditor will do a cost/benefit analysis before deciding to perform tests of controls.

Answer 190

A

What are items the auditor need to estimate during cost/benefit analysis?

In performing the analysis:

The cost of performing a substantive audit without performing tests of controls.
The cost of performing tests of controls.
The cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
The likelihood that the controls to be tested are likely to be effective.

Answer 191

A

What are items the auditor need to estimate during cost/benefit analysis?

In performing the analysis:

The cost of performing a substantive audit without performing tests of controls.
The cost of performing tests of controls.
The cost of the reduced substantive testing that will be performed if the controls prove to be reliable.
The likelihood that the controls to be tested are likely to be effective.

Answer 192

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

Choice 1 - Effective Control

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Choice 2 - Ineffective Control

• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

Choice 2 - Ineffective Control

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Choice 3 - Perform Substantive Testing only
• The total of those two amounts will be compared to the cost of performing substantive tests exclusively.

Choice 3 - Perform Substantive Testing only

= Substantive Testing Cost

The lower of the two amounts will determine the strategy to be taken.

Answer 193

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 194

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 195

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 196

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 197

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 198

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 199

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 200

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 201

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 202

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 203

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 204

A

Cost / Benefit Analysis

Choice 1 - Effective Control
• Add the cost of performing tests of controls to the cost of reduced substantive testing and multiply the total by the probability that the controls will be effective.

= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

Answer 205

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 206

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 207

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 208

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 209

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 210

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 211

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 212

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 213

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 214

A

Cost / Benefit Analysis

Choice 2 - Ineffective Control
• Add the cost of performing tests of controls to the cost of the unreduced substantive testing and multiply the total by the probability that controls will not be reliable, which is 100% minus the probability used previously.

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x Probability of Ineffective Control

or

= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Answer 215

A

Cost / Benefit Analysis

Choose lower cost between
Choice 1 - Effective Control
and
Choice 2 - Ineffective Control

Then compared the lower cost with
Choice 3 - Perform Substantive Testing only

The lower of the two amounts will determine the strategy to be taken.

Answer 216

A

Cost / Benefit Analysis

Choose lower cost between

Choice 1 - Effective Control
= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

and

Choice 2 - Ineffective Control
= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Then compared the lower cost with
Choice 3 - Perform Substantive Testing only
= Substantive Testing Cost

The lower of the two amounts will determine the strategy to be taken.

Answer 217

A

Cost / Benefit Analysis

Choose lower cost between

Choice 1 - Effective Control
= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control

and

Choice 2 - Ineffective Control
= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)

Then compared the lower cost with
Choice 3 - Perform Substantive Testing only
= Substantive Testing Cost

The lower of the two amounts will determine the strategy to be taken.

Answer 218

A

Cost / Benefit Analysis

Example:

Choose lower cost between

Choice 1 - Effective Control
= [ (Test of Controls Cost) + (Reduced Substantive Testing Cost) ] x Probability of Effective Control
= [ $1,000 + $1500 ] x 80%
= $2,000

and

Choice 2 - Ineffective Control
= [ (Test of Controls Cost) + (Substantive Testing Cost) ] x (100% – Probability of Effective Control)
= [ $1,000 + $3,500 ] x 20%
= $900

Then compared the lower cost with
Choice 3 - Perform Substantive Testing only
= Substantive Testing Cost
= $3,500

$900 vs $3,500

The lower of the two amounts will determine the strategy to be taken.

Answer 219

A

Do tests of controls alone are considered sufficient evidence to base an audit opinion?

No, not sufficient

Tests of controls alone are not normally considered sufficient evidence upon which to base an audit opinion.

Answer 220

A

Will further audit procedures be eliminated if tests of controls prove that controls can be relied upon?

No.
Further audit procedures may be reduced but will not be eliminated.

Even when tests of controls prove that controls can be relied upon, further audit procedures may be reduced but will not be eliminated.

Answer 221

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 222

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 223

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 224

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 225

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 226

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 227

A

What is dual purpose testing?

Dual purpose testing consists of tests that are designed to test the effectiveness of controls

while providing evidence as to the fairness or correctness of an element of the financial statements

by supporting one of management’s assertions.

Answer 228

A

What type of testing that

consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions?

Dual purpose testing

Answer 229

A

What type of testing that is designed to test the effectiveness of controls while providing evidence supporting one of management’s assertions?

Answer: Dual purpose testing

In many cases, the auditor will use dual purpose testing, which consists of tests that are designed to test the effectiveness of controls while providing evidence as to the fairness or correctness of an element of the financial statements by supporting one of management’s assertions.

Answer 230

A

What type of testing that

when the results are satisfactory, the auditor will conclude that the control may be relied upon

and the evidence obtained is sufficient to support the assertion,

eliminating the need for further testing?

Answer: Dual purpose testing

Answer 231

A

What type of testing that when the results are satisfactory, the auditor will conclude that the control may be relied upon and the evidence obtained is sufficient to support the assertion, eliminating the need for further testing?

Answer: Dual purpose testing

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AUD 3 Internal Control 10 - 5 Flashcards

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