Identify the correct order of steps for an auditor when applying a top-down approach to select controls to test in an integrated audit.
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- Direction: summarize each step of the risk-based audit process. Testing of ControlsPerforming substantive proceduresOverall review of the financial statementsIssuing audit reportThe auditor’s risk assessment procedures should always include the following, except a. Inquiries of management and of others within the entity b. Analytical procedures c. Observation and inspection d. Substantive test procedures and tests of controlFor risk enabled and risk managed organizations, the conclusion on risk maturity is the first step in being able to provide assurance on risk management processes, management of key risks and reporting of risks. If Panda Company used the RBIA, then: a. The actions that are being taken to add, delete or modify existing responses where they do not currently bring risk within the risk appetite b. Agree all the risk management responses and risk management processes on which objective assurance from internal audit is required c. Produce an audit plan which lists all audits to be carried out over a specified period - usually a year. d. The internal audit activity's assurance strategy is therefore to provide assurance on these areas.
- In determining the operating effectiveness of the internal control policy or procedure, the auditor is concerned with the following: I. How the policy or procedure was applied II. Whether there is consistency in the application of the policy or procedure III. The personnel involved in applying the policy or procedure *A. I, IIB. I,IIIC. II, IIID. I,II,IIIAudit procedures are the processes, techniques, and methods that auditors perform to obtain audit evidence, and includes: O a. Risk assessment procedures; Test of Controls; Substantive procedures O b. Test of Controls only O c. Substantive procedures & Test of controls O d. Risk assessment procedures onlydescribe the objective of audits of fi nancial statements, the types of audit reports, and theimportance of eff ective internal controls
- Place the auditor's activities to assess control risk in the proper order: Group of answer choices Walkthrough, flowchart, tests of controls Flowchart, significant deficiency, audit committee Flowchart, walkthrough, tests of controls Walkthrough, narrative, tests of controlsAn auditor uses assessed control risk to(1) evaluate the effectiveness of the entity’s internal controls.(2) identify transactions and account balances where inherent risk is at the maximum.(3) indicate whether materiality thresholds for planning and evaluation purposesare sufficiently high.(4) determine the acceptable level of detection risk for financial statement assertionsThe auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk. b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated. (AICPA, adapted)
- Determine whether statement 1 and 2 are true or false 5. S1 -Objectives are the overall plans for the entity, while strategies are the operational approaches by which managements intends to achieve its objectives S2- Not all controls are relevant to the auditor’s risk assessment a. False, False b. True, False c. False, True d. True, TrueThe auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelateddetermine whether true or false S1- The extent of planning will vary accordingly to the size of the entity, the complexity of the audit, and the forms of report to be issued. S2- The entity’s control environment serves as a foundation for the other components of internal control.