Chapter 7 Flashcards
What are preventative controls
Controls applied to each transaction before they enter the accounting system to prevent errors or fraud from occuring
What are detective controls
Detective controls are applied after transactions have been processed to identify whether errors or fraud have occurred and to rectify the errors or fraud on a timely
basis
What is reperformance
Involves the auditor reperforming the control to test its effectiveness. Involves the auditor inputting test data into the application to check results
What is control exception
When a control did not operate as expected after testing (deviation)
What is attribute sampling
Sampling a population based on a specific attribute
Larger sample sizes for testing have what relationship
Higher level of assurance
Lower tolerable deviation rate
What is tolerable deviation rate
The maximum rate from a control that the auditor is willing to accept and still use the planned control risk
What is the relationship between tolerable deviation rate and the planned assessed level of control risk
An inverse relationship. As TDR goes up your level of control risk falls. As TDR goes down your level of control risk rises
What is awalkthrough
When an auditor follows a transaction from beginning to end throughout the system to test a control
If an auditor detects a control deviation, what should they do
Either increase sample size, amend decision to rely on control, or test compensating controls
What is a compensating control
Controls that can be substituted for the one being tested and compensate for deficiencies in the accounting system
When do you accept and reject control testing results
Accept = Tolerable Deviation Rate > Actual deviation rate
Reject = Tolerable Deviation Rate < Actual deviation rate
