Week 4 & 5: Systems audit pt2 - Test of control and Substantive testing

Question 1

What is a test of Control?

Answer 1

A test of control assesses the efficiency and effectiveness of internal control processes implemented in a business organisation.

For example: Inspecting a sample of supplier statement reconciliations for evidence that they have been reviewed by an appropriate level of management

Question 2

If cr is too high or too low what must an Auditor do to obtain sufficient appropriate evidence to support the assessed level of control risk (CR)?

Answer 2

Auditor must obtain sufficient appropriate evidence to support the assessed level of control risk (CR).

If CR high do Substantive Testing

The auditor cannot rely on the internal control processes of the audit client

If CR low do a Test of Control
The auditor can rely on the internal control processes of the audit client

Question 3

what is an audit trail?

Answer 3

Audit methodology used by an auditor is dependent on the audit trail of documents which exist

Where no audit trail exists, greater emphasis is placed on:

Observation
Inquiry of the control.

If audit trail does exist:

Inspect documentation associated with the transaction for evidence of the control.