Testing the operating effectiveness of controls

When is the auditor required to design and perform test of operating effectiveness of controls?

A. When the auditor does not intend to rely on the controls

B. When the assessment of risk of material misstatement at the assertion level does not include expectation that the controls are operating effectively or Substantive procedures alone are sufficient

C. When the assessment of risks of material misstatement includes an expectation that the control is operating effectively or substantive procedures alone cannot provide sufficient appropriate audit evidence at the assertion level

In designing and performing tests of controls, the auditor shall obtain more persuasive audit evidence the lower the reliance the auditor places on the effectiveness of a control. Is this statement true or false?

True

False

Factors that affect the risk associated with the control. Select all that apply?

A. The complexity of the control and the significance of the judgments that must be made in connection with its operation

B. The nature and materiality of misstatements that the control is intended to prevent or detect

C. Whether the account balance, class of transactions, or disclosure does not have a history of errors

D. The nature of the controls and the frequency in with which they operate

It is appropriate to use audit evidence about the operating effectiveness of controls obtained in previous audit when addressing a significant risk. Below statement is true or false?

True

False

As inquiry alone is not sufficient to test the operating effectiveness of control, which procedures provides more assurance?

Inquiry + inspection

Inquiry + Observation

Inquiry with inspection and reperformance

What is a dual-purpose testing?

A. When combining inquiry and observation procedures

B. When combining observation and reperformance

C. When combining inspection of documentation with the performance of substantive procedures

D. When combining reperformance with substantive procedures

Why is observation alone not sufficient supporting inquiries?

A. observations are not representative of the usual performance of a control because management and staff may perform their tasks more diligently if they know the auditor is observing them

B. It is not possible to examine that the control was performed at a later date

C. It is not representative for the period of intended reliance.

D. All of the above

If the control is automated and the general IT controls are operating effectively, how many samples should the auditor test in order to provide sufficient appropriate audit evidence that the automated control is operating effectively?

Which factor below is not considered when determining the sample size to be tested when testing operating effectiveness of a control?

A. The complexity of the control

B. Nature of the control

C. Risk of material misstatement classification

D. Risk associated with the control