tailieunhanh - Lecture Auditing and assurance services in Australia: Chapter 9 - Gay, Simnett

Chapter 9 - Tests of controls. After studying this chapter you should be able to: understand that tests of controls are undertaken when the auditor intends to rely on a control to reduce a risk of material misstatement; appreciate that when undertaking tests of controls, the auditor must collect audit evidence about the existence, effectiveness and continuity of controls; identify factors affecting the auditor’s assessment of the sufficiency and appropriateness of evidence of tests of controls. | TESTS OF CONTROLS CHAPTER 9 TESTS OF CONTROLS Provide auditor with evidence to support their assessment of control risk. When control risk assessed at less than high, necessary to gather evidence that controls are working. Auditor will select most efficient and effective combination of tests of controls, and substantive tests of transactions and balances. Auditor must consider: Design Operation of internal control structure PLANNING THE SCOPE OF TESTS OF CONTROLS Nature: If controls exist that auditor expects to rely upon, undertake tests of these controls, otherwise undertake substantive testing. Timing: To aid ability to meet deadlines and scheduling of staff, tests of controls sometimes scheduled before year-end. Testing then extended (rolled forward) until year-end. Extent: For tests of controls related to documents, extent determined by reference to sampling theory. Controls related to accounting routines (. back reconciliations) usually tested by re- performing a small number. TESTS OF CONTROLS AIMED AT DESIGN Generally include: Inquiries of company personnel Inspection of documents and reports Observation of the application of specific internal control policies and procedures TESTS OF CONTROLS AIMED AT OPERATION Should provide evidence that the: Control actually existed Control was effective in achieving its objectives Control operated continuously throughout the period of intended reliance SUFFICIENCY AND APPROPRIATENESS OF TESTS OF CONTROLS Dependent on level of control risk the tests must support The lower the planned assessed level of control risk, the greater the amount of testing that is required OTHER FACTORS AFFECTING SUFFICIENCY AND APPROPRIATENESS Auditor should also consider: Type and source evidence Timeliness Interrelationship of evidence EFFECT OF DOCUMENTATION OF CONTROLS: AUDIT TRAIL Methods used by auditor dependent on whether a documentary audit trail exists Where no audit trail exists, greater emphasis on: . | TESTS OF CONTROLS CHAPTER 9 TESTS OF CONTROLS Provide auditor with evidence to support their assessment of control risk. When control risk assessed at less than high, necessary to gather evidence that controls are working. Auditor will select most efficient and effective combination of tests of controls, and substantive tests of transactions and balances. Auditor must consider: Design Operation of internal control structure PLANNING THE SCOPE OF TESTS OF CONTROLS Nature: If controls exist that auditor expects to rely upon, undertake tests of these controls, otherwise undertake substantive testing. Timing: To aid ability to meet deadlines and scheduling of staff, tests of controls sometimes scheduled before year-end. Testing then extended (rolled forward) until year-end. Extent: For tests of controls related to documents, extent determined by reference to sampling theory. Controls related to accounting routines (. back reconciliations) usually tested by re- performing a .