[Jchen]

Hi Everyone,

I’m confused with this question and need some help!

In assessing control risk, an auditor ordinarily selects from a variety of techniques, including

A. Inquiry and analytical procedures.

B. Reperformance and observation.

C. Comparison and confirmation.

D. Inspection and verification.

Answer: B. Reperformance and observation. Tests of controls directed toward effectiveness or operation of a control would ordinarily include inquiries, inspections of documents, observation, and reperformance of the application of a control. Thus, both reperformance and observation are used by an auditor to assess control risk.

Isn’t assessing control risk is a risk assessment procedure instead of test of control?

Why A is not the answer.

Please help!! Thanks in advance.

– See more at: https://www.another71.com/cpa-exam-forum/topic/assessing-control-risk#sthash.2fQMj7Ee.dpuf

[Pawn Maker]

Hi Jchen,

This one is a perfect example of why AUD is a pain…B is the correct answer because it names two of the four tests of Internal Control.

They are:
Re-performance
-Inquiry
-Inspection
-Observation

A is incorrect because analytical procedures are not a test of internal control. You might have been thinking about the use of analytical procedures in the planning stage of the audit but test of IC are after that stage.

C is incorrect because Comparison is not a test of IC

D is incorrect because Verification is not a test of IC

Hope that helps.

[Jchen]

Hi Pawn Maker,

Thanks so much for the response.

But isn't analytical procedure is part of risk assessment procedure, you do the risk assessment to determine the NET?
Based on my understanding, auditor should do test of the effectiveness of control after risk assessment.

So assessing control risk, is risk assessment or test of control? I'm so confused now..

[jlp0369]

@Jchen, no analytical procedures are part of substantive testing I believe. So you would first assess the risk of material misstatement, then respond to the assessed risk by DESIGNING audit procedures, then you would test internal controls, and then perform substantive testing.

-note, the analytical procedures performed during planning are just to further understand the entity and identify risk areas- they are not used to actually assess control risk (during planning stage).

FAR: 87
REG: 90
BEC: 74(ouch), retake 7/16/16
AUD: 96

[Jchen]

Thank you @ jlp0369!

[Author]

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