The purpose of tests of controls is to provide reasonable assurance that: (a) (b

Question

The purpose of tests of controls is to provide reasonable assurance that: (a) (b) 3. The auditor will obtain sufficient evidence to determine an assessed level of control risk. The auditor has an understanding of the control environment. (c) (d) Errors and fraud are prevented or detected in a timely manner. Substantive testing is minimized Which of the following information should a successor auditor obtain from a predecessor auditor before accepting an audit engagement? (a) Information that might allow the successor auditor to evaluate the 4. (b) (c) (d) integrity of management. An analysis of income statement accounts. An analysis of balance sheet accounts. All information of accounting significance. uhiyh oril eout heenes of eriec s always true? (a) Evidence obtained from outside third parties is always reliable. (b) Accounting information produced from an accounting system that has low control risk is always more relevant than information produced from a system with high control risk. To be appropriate, evidence must be both reliable and relevant. Oral evidence provided by management is not reliable evidence. (c) (d) Which of the following procedures would an auditor most likely perform when planning the audit? (a) Obtain a management representation letter. (b) Assess whether internal controls are operating as prescribed. (c) Review the prior year's working papers. (d) Inquire of the company's attorneys information about pending litigation, claims, and assessments.

Explanation / Answer

Ans to Q No.3:

      C. Errors and frauds are prevented or detected in timely manner.

After understanding of internal controls and arriving at a preliminary assessed level of control risk, an auditor decided to perform tests of controls.

So that the purpose of test of controls is to provide reasonable assurance that errors and frauds are prevented or detected in timely manner.

Ans to Q No.4:

Ans to Q No.5:

Ans to Q No.6:

As one of the first steps in audit planning, the review of the prior year’s audit working papers is one of the most important. Among other things, this review provides the auditor with good knowledge of the prior year’s audit strategies and plans, the reporting entity’s business environment, including internal control, and information about possible risks of material misstatement due to error and fraud.

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