In this chapter, students will be able to understand: understand that tests of controls are undertaken when the auditor intends to rely on a control to reduce a risk of material misstatement; appreciate that when undertaking tests of controls, the auditor must collect audit evidence about the existence, effectiveness and continuity of controls. | Chapter 9 Tests of Controls 9- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Tests of Controls Provides auditor with evidence to support their assessment of control risk. When control risk assessed at less than high, necessary to gather evidence that controls are working. This evidence is gathered via test of controls. If control risk is assessed at high, auditor will not undertake test of controls. Auditor selects most efficient and effective combination of tests of controls, and substantive tests of transactions and balances. Learning Objective 1: 9- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Assessing control risk To assess control risk as high, auditor must expect that substantive procedures alone will provide sufficient appropriate evidence. Areas where substantive procedures alone may not provide sufficient appropriate evidence include routine recording of significant classes of transactions, such as revenue or purchases. These areas often highly automated with little or no manual intervention. 9- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Planning the scope of tests of controls Nature – if controls exist that the auditor expects to rely upon, undertake tests of these controls, otherwise undertake substantive testing. Timing – to aid ability to meet deadlines and scheduling of staff, tests of controls sometimes scheduled before year-end. Testing then extended (rolled forward) until year-end. Extent – the more the auditor relies on controls, the greater the extent of tests of controls. For tests of controls related to documents, extent determined by . | Chapter 9 Tests of Controls 9- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Tests of Controls Provides auditor with evidence to support their assessment of control risk. When control risk assessed at less than high, necessary to gather evidence that controls are working. This evidence is gathered via test of controls. If control risk is assessed at high, auditor will not undertake test of controls. Auditor selects most efficient and effective combination of tests of controls, and substantive tests of transactions and balances. Learning Objective 1: 9- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Assessing control risk To assess control risk as high, auditor must expect that substantive procedures alone will .
