Internal control evidence Flashcards

1
Q

Types of controls

A
  • management controls (entity-level)
  • process controls (process-level)
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2
Q

internal controls (different types)

A
  • segregation of duties (preventive, detective)
  • performance reviews (detective, corrective)
  • physical controls (preventive)
  • processing controls (preventive, corrective)
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3
Q

Test of controls

A

assess control risk (the risk that controls will not prevent or detect a misstatement). The test on the effectiveness of key controls reduces RMM. If control risk assessment is not supported –> increase sutstantive testing

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4
Q

existence test of controls

A
  • inquiry of client personnel including a walkthrough of at least one type of each significant transaction
  • inspection of documents and reports indicating performance of controls done during walkthrough
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5
Q

effectiveness test of controls

A

re-performance by auditor of controls to a sample of transactions or balances

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6
Q

hypogeometric distribution (idea)

A

large populations probability of error of a specific sample size becomes independent from population size

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7
Q

segregation of duties

A

an employee can not perpetrate and conceal fraud or theft and accidental errors are reduced if he/she does not have responsibility only one

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8
Q

performance reviews

A

independent checks on performance by a third party not directly involved in the activity (internal varification)

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9
Q

processing controls

A

ensure accuracy of input and processing, adequacy of documentation, and computer application controls

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10
Q

compensating controls (whole process)

A

controls are not effective or not feasible in the organisation (small organisations)

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11
Q

example entity levels of controls

A
  • monitoring of competition
  • operational effectiveness (risk on delivery, returns, processing errors)
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12
Q

types of control tests

A
  • existence
  • effectiveness
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13
Q

hypergeometric distribution

A

is a probability distribution for sampling with replacement from a population with finite size

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14
Q

substantive testing: achieve

A

evidence on audit objective (completeness, accuracy) achieve allowance for sampling risk within materiality

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15
Q

controls sampling: achieve

A

does a control work effectively achieve deviation rate does not exceed an acceptable level

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