Chapter 8 Flashcards
Responses to assessed risk
Which statement is true regarding assessing the risk of material misstatements in a clients computer environment?
The auditor’s objective with respect to the assessment of risk of material misstatements are the same as in a manual system.
The Integrated Test Facility (ITF) or mini company techniques
Is a development of a test data method.
It allows dummy transactions to be processed at the same time as live transactions, but require additional programming to ensure that programs will recognize the specially coded test data.
The test transaction may be submitted without the company’s operators knowledge.
What is the auditor directly concerned with when testing test of controls?
Deviations from specific controls.
The rate of deviation from a control normally exceeds the error rate in the records.
Parallell simulation
An auditor developed program, NOT the clients program, used to process actual clients data, and compare the outputs and exceptions report with those of the clients application program.
Test of controls are directed towards what?
operating effectiveness. They include inquiries of entity personnel, inspection of documents, reports, and electronic files indicating performance of controls, observation of the application of controls and re-performance of controls by the auditor.
If an auditor decided not to perform test of controls after obtaining an understanding of internal control. It is possible the auditor decided that because
Performing only substantive procedures would effectively reduce audit risk to an acceptably low level.
Why would an auditor use an embedded audit module?
For continuous monitoring, and analysis of transaction processing. An audit module embedded in a clients software routinely selects and abstracts, certain actual transactions and other information with audit significance.
What is LEAST likely to indicate the need to increase the assurance provided by substantive testing?
A decrease in the assessed inherent risk.
