The following are steps in the methodology for designing tests of? controls, sub
ID: 2531707 • Letter: T
Question
The following are steps in the methodology for designing tests of? controls, substantive tests of? transactions, and tests of details of balances for the payroll and personnel? cycle:
1.
Design tests of details of balances for the payroll and personnel cycle.
2.
Evaluate whether control risk can be assessed as low for payroll.
3.
Design and perform? payroll- and? personnel-related substantive analytical procedures.
4.
Identify controls and deficiencies in internal control for the payroll and personnel cycle.
5.
Obtain an understanding of the payroll and personnel cycle internal controls.
6.
Evaluate tests of controls and substantive tests of transactions results.
7.
Design payroll and personnel cycle tests of controls and substantive tests of transactions.
8.
Assess inherent risk for? payroll-related accounts.
9.
Evaluate risk and materiality for payroll expense and liability accounts.
Requirements
a.
Identify? (1) those steps that are tests of controls or substantive tests of transactions and? (2) those that are tests of details of balances.
b.
Put steps that are tests of controls and substantive tests of transactions in the order of their performance in most audits.
c.
Put the tests of details of balances in their proper order.
Requirement a. Identify? (1) those steps that are tests of controls or substantive tests of transactions and? (2) those that are tests of details of balances. ?(If a box is not used in the? table, leave the box? empty; do not select a? label.)
Tests of controls or
substantive tests of
Tests of details
transactions
of balances
6.
2.
3.
7.
8.
4.
1.
Requirements b. and c. Put steps that are tests of controls and substantive tests of transactions in the order of their performance in most audits. Put the tests of details of balances in their proper order. ?(If a box is not used in the? table, leave the box? empty; do not select a? label.)
Tests of controls or
substantive tests of
Tests of details
transactions
of balances
2.
9.
7.
4.
1.
1.
Design tests of details of balances for the payroll and personnel cycle.
2.
Evaluate whether control risk can be assessed as low for payroll.
3.
Design and perform? payroll- and? personnel-related substantive analytical procedures.
4.
Identify controls and deficiencies in internal control for the payroll and personnel cycle.
5.
Obtain an understanding of the payroll and personnel cycle internal controls.
6.
Evaluate tests of controls and substantive tests of transactions results.
7.
Design payroll and personnel cycle tests of controls and substantive tests of transactions.
8.
Assess inherent risk for? payroll-related accounts.
9.
Evaluate risk and materiality for payroll expense and liability accounts.
Explanation / Answer
a. Identify? (1) those steps that are tests of controls or substantive tests of transactions and? (2) those that are tests of details of balances. ?
Solution:
Tests of controls or substantive tests of transactions
Tests of details of balances
2
1
4
3
5
6
7
9
8
?
Working: Tests of controls and substantive tests of transactions for the sales and collection cycle prime purpose is to determine the efficiency of internal controls and to test the substance of the transactions that are produced by such cycle. Tests of details of balances are used by auditors as a collection of evidence that the disclosures, balances and underlying transactions associated with a financial statements of client are correct
?
2) Put steps that are tests of controls and substantive tests of transactions in the order of their performance in most audits.
Answer:
No.
Tests of controls or substantive tests of transactions
1
Obtain an understanding of the payroll and personnel cycle internal controls
2
Identify controls and deficiencies in internal control for the payroll and personnel cycle
3
Evaluate whether control risk can be assessed as low for payroll
4
Design payroll and personnel cycle tests of controls and substantive tests of transactions.
5
Assess inherent risk for? payroll-related accounts
Working: Tests of controls and substantive tests of transactions for the sales and collection cycle prime purpose is to determine the efficiency of internal controls and to test the substance of the transactions that are produced by such cycle.
3) Put the tests of details of balances in their proper order
No.
Tests of details of balances
1
Evaluate risk and materiality for payroll expense and liability accounts
2
Evaluate tests of controls and substantive tests of transactions results
3
Design payroll and personnel cycle tests of controls and substantive tests of transactions
4
Design and perform? payroll- and? personnel-related substantive analytical procedures
Working: Tests of details of balances are used by auditors as a collection of evidence that the disclosures, balances and underlying transactions associated with a financial statements of client are correct
Tests of controls or substantive tests of transactions
Tests of details of balances
2
1
4
3
5
6
7
9
8
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