When auditor assesses control risk below maximum level the auditor is required to document the auditors?

When obtaining an understanding of an entity's internal control procedures, an auditor should concentrate on the substance of the procedures, rather than their form, because

Management may establish appropriate procedures but not enforce compliance with them.

An auditor's flowchart of a client's accounting system is a diagrammatic representation that depicts the auditor's

Understanding of the system

What documentation is not required for an audit in accordance with generally accepted auditing standards?

A flowchart of each major transaction cycle documenting the origination and processing of important accounting records.

What is a management control method that most likely could improve management's ability to supervise company activities effectively?

Establishing budgets and forecasts to identify variances from expectations.

In planning an audit of certain accounts, an auditor may conclude that specific procedures used to obtain an understanding of an entity's internal control structure need not be included because of the auditor's judgments about materiality and assessments of

Inherent Risk. If the auditor has concluded that an account is immaterial and that inherent risk is low, the auditor might decide to skip the procedures used to obtain an understanding of the related internal controls because the risk of a material misstatement occurring is low.

Decision tables differ from program flowcharts in that decision tables emphasize

Logical relationships among conditions and actions.

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Implemented. Obtaining an understanding of an entity's internal controls over financial reporting involves evaluating the design of relevant controls and determining whether they have been implemented (sometimes referred to as "placed into operation").

An advantage of using systems flowcharts to document information about internal control, instead of using internal control questionnaires, is that systems flowcharts

Provide a visual depiction of clients' activities

The primary objective of procedures performed to obtain an understanding of the internal control structure is to provide an auditor with

Knowledge necessary for audit planning.

An auditor's primary consideration regarding an entity's internal control structure policies and procedures is whether they

Affect the financial statement assertions.

What procedure would an auditor most likely perform to test controls relating to management's assertion about the completeness of cash receipts for cash sales at a retail outlet?

Observe the consistency of the employees' use of cash registers and tapes.

After assessing control risk at below the maximum level, an auditor desires to seek a further reduction in the assessed level of control risk. At this time, the auditor would consider whether

Additional evidential matter sufficient to support a further reduction is likely to be available.

In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations.
The auditor most likely would give broader consideration to the implications of a deviation if it was

Initially concealed by a forged document.

When an auditor assesses control risk at the maximum level, the auditor is required to document the auditor's

Understanding of the entity's accounting system & basis for concluding that the control risk is at the maximum level

After obtaining an understanding of the internal control structure and assessing control risk of an entity, an auditor decided not to perform tests of controls.
The auditor most likely decided that

It would be inefficient to perform tests of controls that would result in a reduction in planned substantive tests.

Which of the following is not a step in an auditor's decision to assess control risk at below the maximum?

In assessing control risk below maximum, the auditor must:
1) obtain an understanding of the internal control structure;
2) identify specific controls relevant to specific financial statement assertions; and
3) test the identified controls to determine if they are operating effectively. The auditor would NOT perform tests of details of transactions. These are substantive procedures which would generally be performed after the assessment of control risk is made.

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Identify specific internal control policies and procedures that are likely to detect or prevent material misstatements.

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the risk that

Material misstatements may exist in the financial statements.

An auditor assesses control risk because it

Affects the level of detection risk that the auditor may accept.

An auditor may decide to assess control risk at the maximum level for certain assertions because the auditor believes

Evaluating the effectiveness of policies and procedures is inefficient.

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

Risk that material misstatements exist in the financial statements.

When assessing control risk below the maximum level, an auditor is required to document the auditor's

Understanding of the entity's control environment & basis for concluding that control risk is at the maximum level

What possible circumstance most likely would cause an auditor to consider whether material misstatements exist in an entity's financial statements?

Transactions selected for testing are not supported by proper documentation.

In obtaining an understanding of an entity's internal control structure, an auditor is required to obtain knowledge about the

design of policies and procedures

After obtaining an understanding of the internal control structure and assessing control risk, an auditor decided to perform tests of controls. The auditor most likely decided that

It would be efficient to perform tests of controls that would result in a reduction in planned substantive tests.

Control risk should be assessed in terms of

financial statement assertions

As part of understanding the internal control structure, an auditor is not required to

Obtain knowledge about the operating effectiveness of the internal control structure.

An auditor would most likely be concerned with internal control structure policies and procedures that provide reasonable assurance about the

Entity's ability to process and summarize financial data.

An auditor may decide to assess control risk at the maximum level for certain assertions because the auditor believes

Control policies and procedures are unlikely to pertain to the assertions.

The objective of tests of details of transactions performed as tests of controls is to

Evaluate whether internal control structure procedures operated effectively.

Regardless of the assessed level of control risk, an auditor would perform some

Substantive tests to restrict detection risk for significant transaction classes.

When reporting on conditions relating to an entity's internal control observed during an audit of the financial statements, the auditor should include a

Restriction on the distribution of the report.

When communicating internal control related matters noted in an audit, an auditor's report issued on significant deficiencies should indicate that

The purpose of the audit was to report on the financial statements and not to provide assurance on internal control.

An auditor's letter issued on significant deficiencies relating to an entity's internal control observed during a financial statement audit should

Indicate that the audit's purpose was to report on the financial statements and not to provide assurance on internal control

In assessing the competence of an internal auditor, an independent CPA would most likely obtain information about the

Quality of the internal auditor's working paper documentation.
To evaluate competence of an internal auditor, a CPA would obtain information about: 1) educational level and professional experience; 2) professional certification and continuing education; 3) audit policies, programs, and procedures; 4) assignment practices; 5) supervision and review; 6) quality of working paper documentation, reports and recommendations; and 7) performance evaluation.

When considering the objectivity of internal auditors, an independent auditor should

Determine the organizational level to which the internal auditors report.

Determine the organizational level to which the internal auditors report.

Determine the organizational level to which the internal auditors report.

An internal auditor's work would most likely affect the nature, timing, and extent of an independent CPA's auditing procedures when the internal auditor's work relates to assertions about the

Existence of fixed asset additions.
Some of the work performed by internal auditors may provide direct evidence about material misstatements in assertions. As a result, the auditor may be able to rely upon such work and reduce the nature, timing, or extent of the auditing procedures to be performed related to those assertions. Internal audit work pertaining to the existence of fixed asset additions would provide direct evidence which could be used to restrict other audit work to be performed.