Recap D3 - Staff 2

Which of the following is NOT a method to test control?

• Inquiry
• Observation
• Inspection
• Validation

When do we perform the test of controls procedures during the audit?

• Before the balance sheet date.
• On the balance sheet date.
• After the balance sheet date.
• At any point during the audit process, as deemed appropriate by the auditor.

What do we include in the design of our tests of controls?

• Nature of our tests of controls
• Timing of our tests of controls
• Extent of our tests of controls
• A, B and C are incorrect
• A, B and C are correct

What is the primary purpose of testing controls in an audit?

• To assess the accuracy of financial statements
• To evaluate the effectiveness of the entity's internal control system
• To determine the competence of the management team
• To ensure compliance with tax laws

Information Produced by the Entity (IPE) is crucial in an audit. Which of the following best describes a key consideration when relying on IPE?

• The information must be produced by external sources to be considered reliable.
• The auditor should assess whether the information is sufficiently precise and detailed for the purpose.
• The information should only be used if it has been published in the entity's annual report.
• The auditor must always create independent IPE to corroborate the entity's data.

What is the importance of evaluating the reliability of Information Produced by the Entity (IPE) in an audit?

• To ensure that the IPE has no relevance to the audit objectives.
• To guarantee that the IPE can be used without verification or corroboration.
• To determine whether the IPE is sufficiently precise and detailed for the auditor's purposes.
• To confirm that the IPE is appropriate for the auditor to use as audit evidence.

When making our inherent risk assessment at the assertion level, we consider:

• Inherent risks, individually and in the aggregate
• What Can Go Wrongs, individually and in the aggregate
• Our controls reliance strategy
• Both A and B

We document our control risk assessment for each relevant assertion for each significant account and disclosure.

• True
• False

Which of the following is not part of the audit risk model?

• Entity Level Control Risk
• Detection Risk
• Inherent Risk Assessment
• Control Risk Assessment

Which of the following statements is true about completing the primary substantive procedures (PSPs)?

• As long as we complete the PSPs, we will address all risks of material misstatement.
• It is rare that we would need to design an OSP to address a risk of material misstatement.
• The PSPs provide the primary substantive audit evidence regarding the fairness of the account balances.
• We are required to complete all PSPs for all relevant assertions.