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ICAS - ABS > Module 17 > Flashcards

Module 17 Flashcards

1
Q

Three components of internal control assessed at planning stages

A

Control environment
Risk assessment procedures
Monitoring of controls

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2
Q

Components of internal control systems identified at the planning stage

A

Information systems

Control activities

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3
Q

Auditor must gain understanding of control activities in place relevant to the audit which they deem necessary to understand (2)

A
  • Risk of material misstatement at the assertion level

- Significant risks identified

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4
Q

Tabs

A

Brown

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5
Q

Auditors understanding of ITGC should be documented as (4)

A

1) Understanding of ITGC
2) Procedures to evaluate design and implementation and operating effectiveness of controls
3) Deficiencies
4) Conclusion on relevant audit assertions

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6
Q

If the information system is very manual

A

Higher risk of human error

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7
Q

If the IT system is highly complex

A

May make it more risky

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8
Q

Additional risks of IT systems: (4)

A
  • IT system is very manual
  • Complex IT system
  • New IT system
  • Increased risk profile of transactions
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9
Q

Audit of IT may require (unless simple ITGCs)

A

IT Specialists

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10
Q

Understanding of IT control activities within a process can be gained through (3)

A
  • Discussion with activity owners
  • Reviewing procedural manuals
  • Confirming procedures documented in PY audit file
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11
Q

Variety of methods to document cycles (3)

A
  • Flowcharts
  • Narrative notes
  • Checklists
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12
Q

Impact of weak control environment/ monitoring (2)

A

Controls less likely to be designed well or operating consistently

Weaknesses likely to affect number of systems therefore number of areas in FS

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13
Q

Impact of weak risk assessment procedures

A

May indicate inefficiencies in control system (controls not addressing nature of risks)

Increases likelihood of those risks occurring

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14
Q

Impact of weak information systems

A

Potential for override of controls

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15
Q

Impact of weak ITGC

A

Potential for transactions being processed through system incorrectly Eg if no passwords - no segregation of duties

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16
Q

Once system has been documented

A

Walkthrough test should be completed to confirm if understanding is correct

17
Q

Walkthrough test =

A

When one or more transactions is followed through system from initiation through to reporting and settlement

18
Q

Testing operation of controls is necessary to obtain audit evidence regarding the existence and effectiveness of internal control system at: (3)

A
  • Mitigating risks
  • Preventing material misstatements
  • Detecting and correcting material misstatements
19
Q

In combination with enquiry, other procedures to test controls are (3)

A
  • Inspect
  • Observe
  • Reperforn
20
Q

Must test control in operation

A

Throughout the whole period particularly high risk periods eg holidays

21
Q

Each testing technique has different level of (2)

A
  • Relevance

- Reliability

22
Q

Two areas where CAATs/ analytics can be used

A
  • Test data techniques

- Audit data analytics

23
Q

Test data techniques used to

A

Verify proper operation of computer processes and controls built into computer programs

24
Q

Test data

A

Set of fictitious transactions which are inputted into the system to verify the correct operation of the system

25
Q

Test data can be applied to either

A

Live or dead system

26
Q

Weakness of test data techniques

A

Test the operation of controls at a single point in time

27
Q

Examples of ADAs (audit data analytics) (6)

A
  • Re-performing
  • Matching transactions
  • Review for missing items eg sequentially numbered
  • Identifying breach or management override of control activities
  • Testing interfaces
  • Assisting in segregation of duties testing
28
Q

In comparison to test data, ADAs provide

A

Greater coverage over relevant reporting period as they can assess and analyse much larger volumes of information

29
Q

Routine transactions - risk of misstatement

A

Lower - more predictable

30
Q

When documenting control test ensure word it to include (3)

A
  • Technique (eg inspect)
  • What you are looking at (eg sample)
  • What you are looking for (eg signature)
31
Q

Inventory counts ISA

A

ISA 501

32
Q

Considerations of completeness and existence of inventory (7)

A
  • Reliability of inventory systems
  • Timing of physical inventory counts relative to YE
  • Location of inventory
  • Physical controls eg over theft
  • Nature of inventory
  • Degree of fluctuations of inventory levels
  • Difficulty in assessing quantity
33
Q

Considerations of RoMM in completeness and existence of inventory as a result of fraud (4)

A
  • False sales raised relating to inventory being moved to another location rather than delivered to customers
  • Appearance of inventory altered so appears higher value/ quantity
  • Estimation techniques inappropriate
  • Inventory count records altered
34
Q

Perpetual inventory counts assessment

A

Reviewing procedures used during the year (including attendance of one or more of perpetual counts)

35
Q

If differences in perpetual counts vs inventory system

A

Consider asking the client to perform a full year end count

36
Q

Attendance at perpetual count by the auditor will be to perform

A

Compliance tests only

37
Q

Where controls have been found to be absent, designed ineffectively or are not operating throughout the period

A

Auditor must conclude there should be no or limited reliance placed on these controls, therefore largely substantive approach

38
Q

How to communicate control findings to TCWG

A

Management letter should be sent to TCWG detailing the control failure, weakness or absence

ICAS - ABS (21 decks)

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