![]() ![]() For example, we may ask the client’s personnel for an explanation about inventory counting procedures at year-end. Inquiry is the process of asking for an explanation from the client relating to the control process, or transactions. The four types of test of controls include: ![]() This may happen when the client uses the IT system to perform certain business transactions, in which no document is produced or maintained. Likewise, we need to perform the test of controls to obtain additional audit evidence at the assertion level. This is the case when we cannot obtain sufficient appropriate audit evidence if we perform only the substantive procedures alone. Hence, we need to perform the test of controls to obtain evidence to support our assessment. This is the case when we have assessed that the control risk is low. This is when we believe the client’s internal controls work effectively in preventing or detecting the risks of material misstatements at the assertion level. The first purpose of the test of controls is to reduce substantive audit procedures by relying on the client’s internal controls.
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