Control Interno 1

Expected controls reliance is the level of evidence (expressed as None, Partial or High) an engagement team expects to obtain from testing an entity's controls for design effectiveness, including controls evidence gathered in prior audits, if appropriate. True. False.

Setting the expected controls reliance needs to be the same each year for a continuing engagement. True. False.

As long as you select the control sample size for High assurance, you are able to obtain High controls reliance even if not all assertions of the RoMM are addressed by the control testing. True. False.

After the new financial manager joined your client during the second half of the year, she implemented a new control over the Purchases and payable process. The audit team can place High controls reliance on this control if Purchases and payables is a Significant risk area. True. False.

Assume the following slider settings: Inherent Risk: Elevated Expected Controls Reliance: High Planned Substantive Evidence: High Is an Aura explanation required for this setting?. Yes. No.

The engagement team tested a control over the occurrence of Revenue. A control deficiency was noted during the testing performed. However, there is a mitigating control in place which the engagement team tested with no exceptions. Would these facts alone affect the Expected Controls Reliance slider setting?. Yes. No.

If exceptions were noted during testing in the previous year, controls would not be relied upon. True. False.

Inventory is a significant risk. The entity has a strong internal control environment. The expected controls reliance must therefore be set at High. True. False.

The entity has a strong internal control framework. The controls in place over Property, Plant, and Equipment (PPE) address all relevant assertions. Control deficiencies were noted during the prior year, but were remediated before the end of the prior year. Could High controls reliance over PPE be appropriate in this circumstance?. Yes. No.

You are the engagement manager at a manufacturing entity. When considering the controls in place over the accuracy of Revenue recorded at the entity, the following control was noted: The controller agrees the price on the invoice to the approved price listing for each shipment that is sent out. There are no other controls over this assertion. Is High controls reliance over the accuracy assertion in Revenue appropriate?. Yes. No.

The audit team has typically obtained High controls reliance over Inventory in prior years. Which of the following events could result in the team only obtaining Partial controls reliance in the current year: A new financial manager, who is equally competent to his predecessor, was appointed. He will however continue to perform all the same controls as the previous manager. The entity has changed its operating system during the year. The senior engagement team member who tested inventory in previous years is no longer part of the team.

When controls are successfully implemented during the year but only operate for part of the financial period and the team wants to rely on these controls, what level would the engagement team set the controls reliance sliders to?. Low. Partial. High.

The engagement leader (EL) is reviewing the Expected Controls Reliance slider set for Property, plant and equipment. Assume the following: a) The entity has a strong control environment. b) Controls provide audit evidence only over the accuracy assertion and there are no controls in place for other relevant assertions. c) No history of control deficiencies noted in the process. The engagement team set the Expected Controls Reliance at High. Could the EL challenge this setting?. Yes. No.

The entity had to migrate from an old procurement IT system to a new complex ERP system in September of the current year. Prior to the migration, controls were effective, however after the migration, there were several control deficiencies identified. The Expected Controls Reliance slider has to be set as None, as there has been a change in the system and the team would not be able to rely on the controls for the period post migration. True. False.

We plan to achieve High controls reliance when we are able to obtain sufficient appropriate audit evidence that the control(s) in place operated effectively throughout the period of reliance and will partially mitigate the risk to which they/it relates. True. False.

The entity has a strong control environment, controls provide audit evidence over all the assertions and control deficiencies noted during the previous year have been remediated/mitigated. What level of controls reliance would the engagement team select if they plan to maximise their controls reliance?. Low. Partial. High.

If we plan to test a high level business performance review (BPR) control, we would typically set the Expected Controls Reliance slider to Partial. True. False.

Our decision on whether to rely on audit evidence obtained in previous audits for controls that have not changed since they were last tested and are not controls that mitigate a significant risk is a matter of professional judgment. The length of time between retesting such controls is also a matter of professional judgment, but is required to be at least once every three years. True. False.

We would not rely on controls for first year engagements. True. False.

The engagement team would not rely on controls in the current year if the testing strategy for prior years has been fully substantive in nature. True. False.

The susceptibility of an assertion to material misstatement due to the particular characteristics of a class of transactions, account balances, or disclosures describes what type of risk?. Inherent risk. Control risk. Detection risk.

What would happen if we did not apply a risked-based audit approach and treated all of the potential risks in the same way?. Over-auditing in some areas and under-auditing in others. You would get equal coverage and audit evidence in all areas.

What is the risk that an inappropriate opinion on financial statements will be issued called?. Audit risk. Inherent risk. Detection risk.

Which risks are specifically required on each engagement by ISA 240?. Risk of management override of controls. Risk of fraud in revenue recognition. Both.

The risk of management override of controls is considered a significant risk on most audit engagements, and can be rebutted in limited circumstances. True. False.

The engagement leader is the most appropriate person to set all the sliders in the Scoping And Inherent Risk Assessment view in Aura. True. False.

Accounts payable is a Normal risk area on your engagement. The engagement team has determined there is Partial controls reliance and has set the slider for planned substantive evidence to High. The Aura functionality will not allow the engagement team to set the slider as such. True. False.

We document our inherent risk assessment in Aura using the Scoping and Inherent Risk Assessment view. True. False.

Name report generated in Aura which can be used to facilitate the team manager and engagement leader review of the audit testing strategy and plan. Summary of Risk and Planned Evidence report. Risk and Response Summary report.

The team manager has the sole responsibility for designing an appropriate response to risks. True. False.

For a significant risk, the engagement team would always set the controls reliance risk slider to at least Partial. True. False.

If an alert is generated in Aura when setting the sliders, we have to document an explanation before marking the risk prepared if we want to retain the slider settings. True. False.

Which of the following is the effective and efficient testing strategy for an elevated risk? . High controls reliance and High substantive testing. Partial controls reliance and no substantive testing. Partial controls reliance and Low substantive testing.

All business risks and fraud risks arising from the entity need to be documented in our Aura file. True. False.

Aura helps us perform an effective and efficient audit by generating an alert if we set the Expected Controls Reliance and Planned Substantive Evidence sliders at levels which would indicate over or under-auditing. True. False.

If an alert is generated in Aura while setting the controls reliance and substantive evidence sliders and we choose to keep the sliders set as they are, then Aura requires us to document our rationale for this in an explanation, before the risk can be marked as prepared. True. False.

The engagement leader only needs to be involved in decisions related to the audit plan after the audit risks and their related sliders are marked as prepared and reviewed by the team manager. True. False.

The planning sign-off EGA requires the team manager and engagement leader to be satisfied that, for the purpose of planning, risks of material misstatement are identified, assessed and documented appropriately and an audit strategy and plan in response to those risks has been developed and documented appropriately. True. False.

A higher inherent risk can be reduced because the entity has implemented effective controls that address the risk of a misstatement at an assertion level. True. False.

The level of inherent risk for Assumed RoMMs can be changed, including changing the assertions that are mapped to the Assumed RoMMs. True. False.

When an incompatibility alert is received in the Scoping and Inherent Risk Assessment view you are required to either update the assessment of inherent risk factors to be compatible or provide a rationale for the selection that will be retained in the Aura file. True. False.

Assume Revenue is a significant risk area and the expected controls reliance is set to Partial. Can Low substantive testing be performed?. Yes. No.

Planned Substantive Evidence is the level of evidence (expressed as Low, Medium or High) an engagement team expects to obtain from performing substantive procedures as a whole in order to reduce audit risk to an acceptably low level. True. False.

Management does not have strong controls in place over all assertions, but they are in the process of designing and implementing internal controls. Accounts payable is a Normal risk. Is it necessary to test controls over Accounts payable?. Yes. No.

The control environment at the entity is strong and management is sufficiently experienced. Property, plant and equipment is material and is a Normal risk. The engagement team has decided to place High reliance on controls. Would the engagement team have to perform any substantive procedures?. Yes. No.

Inventory is a significant risk area. Controls are operating effectively during the year, and High control reliance will be obtained. What level of planned substantive procedures would be LEAST appropriate?. High. Moderate.

When the approach to a significant risk consists only of substantive procedures, sufficient appropriate audit evidence can be obtained by performing substantive analytical procedures. True. False.

For a significant risk, it is typically most appropriate to set the sliders to High control reliance and High substantive testing in order to provide maximum evidence. True. False.

A combination of tests which individually provide lower evidence may provide High evidence overall. True. False.

Are there instances where substantive procedures alone would not be appropriate?. Yes. No.

The following may be considered an appropriate testing strategy consistent with PwC Audit: Inherent risk: Significant risk Expected controls reliance: High Planned substantive evidence: Low. True. False.

In order to obtain more persuasive audit evidence because of a higher assessment of risk, the auditor may increase the quantity of evidence or obtain evidence that is more relevant or reliable. True. False.

Revenue is a significant risk area. The audit team has determined that they cannot place reliance on controls. What level of substantive evidence is appropriate?. High. Moderate.

For a significant risk, depending on the assertions that are relevant, a Low level of planned substantive evidence may be appropriate. True. False.

What is the appropriate level of planned substantive evidence for a Normal risk with Partial expected controls reliance?. Moderate. Low.

There is a significant risk over the existence of Inventory. Would it be appropriate to select a Low level of substantive evidence, given that we have set the expected controls reliance slider to Partial?. Yes. No.

Where our inherent risk is Normal, and we plan to place partial reliance on controls, is it necessary to perform substantive procedures?. Yes. No.

Unsatisfactory results from tests of controls will affect the substantive testing. True. False.

A testing strategy consisting of Partial expected controls reliance and a Medium level of planned substantive evidence may be appropriate to address which level of risk?. Low. Elevated.

In certain circumstances we may plan to achieve High planned substantive evidence in respect of a Normal risk when we have planned to obtain no evidence from controls testing. True. False.

Would substantive procedures alone be an appropriate approach in the following situation? An entity provides services to customers through the internet and electronically logs the services provided. It initiates and processes its billings, and automatically records such amounts in electronic accounting records that are part of the system used to produce the entity's financial statements. Yes. No.

What would be the MOST appropriate benchmark and rule of thumb percentage to calculate overall materiality for a not-for-profit entity that is a PIE?. 1% of total expenses or total revenue. 3% of profit before tax. 5% of total assets.

There is a history of misstatements and significant risk in a particular account. What is the MOST appropriate haircut to be used when determining performance materiality for this entity?. 25 %. 50 %.

The audit team has analysed the fraud triangle and identified that one of the fraud factors exists – opportunity to commit fraud. They concluded that this gives a rise to a significant fraud risk. Is this reasoning appropriate, and why?. Yes. No.

If an engagement team does not plan to rely on controls in a business process, do they still have to test the operating effectiveness of ITGCs?. Yes. No.

What would be the MOST appropriate rule of thumb for entities other than not-for-profit entities, where total assets are used as the benchmark, as profit/loss before tax is not considered the appropriate benchmark?. Up to 5% for PIE entities and 10% for Non-PIE. Up to 1% for PIE entities and 3% for Non-PIE. Up to 2.5% for PIE entities and 3.5% for Non-PIE.

As a result of performing further audit procedures, new information changing the auditor’s understanding of the entity and its operations was received. Will this have an effect on the materiality levels determined by the engagement team?. Yes. No.

Three common factors that need to be considered in order to rebut the presumed risk of fraud in revenue recognition are: the level of pressure on management to manipulate revenue, the level of complexity of revenue recognition, and that any significant post sale obligations are stated in signed contracts. True. False.

A significant inherent risk is identified, however the entity has implemented effective controls that fully address the risk of a material misstatement at an assertion level. It is important that we consider such controls and impact they have on the inherent risk as part our risk assessment process. True. False.

The engagement team decides to place reliance on an entity’s controls as part of the audit strategy. The entity is an airline that relies on a sophisticated system of automated controls to update flight schedules. Do they need to test these automated controls as part of the audit?. Yes. No.

PwC Audit does not require us to evaluate the reliability of the data used for risk assessment analytical procedures that is obtained from the entity. The reliability of the data needs to be assessed when the engagement team is performing tests of controls or substantive procedures. True. False.

What are the main considerations when allocating resources to perform the review of minutes of meetings and significant contracts?. Experience. Grade.

Can you use risk assessment analytical procedures when performing overall conclusion analytics?. Yes. No.

Does the effectiveness of the entity’s internal controls and/or number of prior year misstatements, have an impact on overall materiality? If yes, what is the impact?. Yes. No.

You identified controls you intend to reply upon and the only IT dependencies associated with the control are system-generated reports. You are therefore required to identify IT related risks and evaluate the design and implementation of the ITGCs related to those risks. True. False.

RiskMates provide a roadmap of the content that is included in Aura. True. False.

Determining nature, timing and extent of RESOURCES (i.e. assignees for the selected EGAs) is part of developing audit strategy. True. False.

We are required to document the business risks of an entity even if they do not result in audit risks. True. False.

Do the risks around related party transactions typically represent risk of material misstatement at the assertion level for classes of transactions, account balances, and disclosures?. Yes. No.

Inherent risk assessment helps the auditor to reduce an entity’s business risk to an appropriate level. True. False.

Which of the following is NOT an element of the fraud triangle?. Incentive/Pressures. Rationalisation/Attitude. Opportunity. Careful timing.