AUDCIS SQ - 2023-04-29

Which of the following statements are false?

I. In most cases, the existence and operating effectiveness of key controls do not reduce the magnitude or impact of an inherent risk

II. The existence and operating effectiveness of key controls may reduce the likelihood or probability of an inherent risk materializing

• I only

• II only

• Both I and II

• Neither I nor II

Which of the following is the result if an Auditor fails to properly identify the significant risks in an audit?

• Inherent risk increases

• Detection risk increases

• Control risk increases

• Control risk decreases

Which of the following is an example of a proper Inherent Risk statement with a financial reporting impact?

• The Branch Manager may fail to void a transaction on time

• The Branch Manager may void a valid transaction by mistake

• Not all customer payments received may be recorded

• Not all staff might be properly trained

When performing a Test of 1 for an application control which was supposedly assessed as the key control for a given risk, the IT Auditor noted that such application control was not working as intended. What is the best course of action which the IT Auditor should do in this case?

• Substantiate the exception as an ML item and identify if there are compensating controls which may be relied upon instead and perform the TOC on such compensating controls

• Extend the test to 25 samples

• Perform TOT instead since it's not possible to identify the attributes of control

• Substantiate the exception as an ML item and advise the financial audit team that a controls-reliance approach may not be applicable and that extended substantive procedures would be needed

Which of the following pertains to a control risk?

• Not all journal vouchers may have been approved by the Accounting Manager

• Deliveries recorded may not pertain to actual deliveries

• The auditor erroneously assessed the likelihood of a risk

• The auditor assessed the operating effectiveness of controls as "effective" when in reality such controls are not consistently performed

Which of the following is a substantive procedure that aims to test the occurrence assertion?

• Obtaining a sample of purchase orders and checking whether each one has a corresponding receiving report

• Performing an inspection of check vouchers to ensure they are properly signed

• Performing analytical procedures on the financial statements

• Obtaining the entire population of check vouchers and checking whether each one has a corresponding receiving report

Which of the following is a test of control procedure that aims to test the occurrence assertion?

• Obtaining a sample of purchase orders and checking whether each one has a corresponding receiving report

• Performing an inspection of check vouchers to ensure they are properly signed

• Performing analytical procedures on the financial statements

• Obtaining the entire population of check vouchers and checking whether each one has a corresponding receiving report

Which of the following is a test of control procedure that aims to test the completeness assertion?

• Evaluating whether the allowance for doubtful accounts is reasonable and adequate

• Tracing a sample of approved request for payment documents to recorded disbursements in the system

• Tracing a sample of pending purchase requisition documents to receiving reports

• Checking whether documents are automatically pre-numbered by the system

Which of the following is a substantive procedure that aims to test the completeness assertion?

• Evaluating whether the allowance for doubtful accounts is reasonable and adequate

• Tracing a sample of approved request for payment documents to recorded disbursements in the system

• Tracing a sample of pending purchase requisition documents to receiving reports

• Checking whether documents are automatically pre-numbered by the system

Which of the following is a test of control procedure that aims to test the accuracy assertion?

• Obtaining a list of sales invoices and performing recalculation procedures

• Checking the presence of an automatic calculation feature in the system

• Obtaining proof that mandatory fields are in place when recording a transaction in the system

• Performing a Benford's Law analysis on transactions