Fieldwork And Testing Flashcards
The purpose of discussing and observing monitoring controls is to determine that they are…
- Designed to achieve objectives
2. Working as designed
What are the five key stages of the engagement process?
- Discussion and observation of monitoring controls.
- Verification of evidence.
- Documenting results of audit work.
- Assessing management’s evaluation of residual risks.
- Conclusions on responses covered by assignment.
What processes might be used in verifying evidence?
- Documentary analysis
- Interview
- Observation
- Calculation and analysis
When documenting audit results under RBIA, links between what should be made clear?
Risks
Responses
Assurances
Work done
What does IA conclude on when assessing m’ment’s evaluation of residual risks?
Specific risk scores in the risk register
How should IA proceed if systemic risk management failings are identified during the audit?
Should include in organisational level conclusions on risk maturity
On what two aspects of risk responses should IA conclude?
Design Effectiveness (working as designed)
In RBIA, audit conclusions should be linked to…
Risks that are managed by responses tested
What are the two general forms of audit testing?
Substantive testing
Compliance testing
… tests involve detailed tests of transactions or account balances
Substantive
Substantive tests are detailed tests of t… or a… b…
Transactions or account balances
True or false: substantive tests test control activities
False
Substantive tests are generally used when c… e… is weak
Control evaluation
A characteristic of substantive tests is that the samples are…
Much larger
Compliance tests establish whether…
Controls are being applied as prescribed
Compliance tests test whether the result of the control is…
Achieved as intended
Compliance tests test whether the control is o…
Operating
If controls are assessed as inadequate, what kind of testing should be used?
Substantive testing
Compliance tests tell the auditor more about the o… of the s… than substantive tests
Operation of the system
True or false: substantive tests give some level of assurance about achievement of future objectives
False
Name four specific types of testing technique
Documentary analysis
Interviewing
Observation
Calculation and analysis
Give some examples of documentary analysis
Review of bank recs to ensure carried out
Examination of payments to ensure authorised
Examination of personnel files to ensure references taken up
Give some examples of the use of interviewing
Interviewing payments staff to establish whether password disclosure procedures are known
Interviewing warehouse staff to establish nature of checks on goods received
Give examples of the use of observation
Observing environmental conditions in a temperature controlled area
Observation of security checks on entry to premises
In analytical review, the auditor establishes a b… for a relationship then checks to see if it exists
Benchmark
In analytical review, the auditor establishes a benchmark for a relationship, then…
Checks to see if it exists
Describe analytical review
In analytical review, the auditor establishes a benchmark for a relationship, then checks to see if it exists
Give three reasons why analytical review is a useful technique
- Flexible - can be used in many different ways
- Quick and easy to do - especially in computerised environment
- Cost effective method of substantive testing
What are the two techniques of analytical review?
- Trend analysis
2. Ratio analysis
Trend analysis compares…
Data over periods of time
Ratio analysis compares…
Size of one thing to another
The engagement testing programme is developed from the…
Risk matrix
The testing program should link back to…
Individual risks
What will the testing programme cover?
- How much testing to undertake
- What types and techniques of testing
- What periods tests will cover
- What sampling types and sizes to be used
How will strong risk mitigation in an audit area affect testing?
Less testing and most testing will be compliance testing.
Substantive testing may be required when the auditor needs to q… errors and exceptions
Quantify
Substantive testing may be required when compliance tests reveal…
Weakness in control
Substantive testing may be required when management have…
Expressed concern about part of their activity
When considering the evidence required, the auditor needs to understand what l… of a… is acceptable and how much evidence this will require
Level of assurance
If audit evidence is not provided in the time available, how should IA proceed?
Reduce level of assurance
OR
Increase audit time
What two things determine the choice of evidence techniques?
- Nature of the activity
2. Evidence requirements
E… available may determine how detailed testing will be
Expertise
Expertise available may determine how d… testing will be
Detailed
If evidence is not available, the level of … should be adjusted
Assurance
What five things affect the cost of the audit activity?
- How much testing done
- How many auditors involved
- Type of tests
- Locations visited
- Number of visits
If cost is likely to impact on the scope of the engagement, how should management be informed?
Via terms of reference
What are the three main reasons sampling is used?
- Gives level of assurance required in almost all cases
- Best use of audit resources
- 100% testing does not necessarily give 100% assurance
What are the two general methods of sample selection?
- Judgmental sampling
2. Statistical sampling
Which method of sampling is used most often: judgmental or statistical sampling?
Judgmental sampling
In judgmental sampling, auditors use k… and experience to determine what transactions to sample
Knowledge
In judgmental sampling, auditors use knowledge and e… to determine what transactions to sample
Experience
When is judgmental sampling suitable?
- When it will satisfy evidence requirements
- Auditors familiar enough with audit area
- Samples need to include items prone to fraud, etc
- No need to extend results of sample to whole population
- Statistical sampling not practical
