[slammajamuh]

Which of the following procedures is considered a test of controls?

a. An auditor reviews the entity’s check register for unrecorded liabilities.

b. An auditor evaluates whether a general journal entry was recorded at the proper amount.

c. An auditor interviews and observes appropriate personnel to determine segregation of duties.

d. An auditor reviews the audit workpapers to ensure proper sign-off.

Correct answer is B, but i was thinking it was C.
It was my understanding that you test segregation of duties through test of controls: Reperformance, Inspection, Inquiry, Observation. That leads me to believe C is correct, but is it simply for the fact it uses the words “to determine” that it is implying obtaining an understanding of IC and not testing controls?

[pharaoh]

I have that question in Becker and the answer is C and evaluation of entries at proper amount is substantive testing

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[slammajamuh]

@Pharaoh
I use Roger and this is the explanation given:
By evaluating whether a general journal entry was recorded at the proper amount, the auditor is testing controls over the recording of journal entries. Reviewing the check register for unrecorded liabilities is a substantive test of details. Interviewing and observing personnel to determine segregation of duties is part of obtaining an understanding of internal controls so it can be evaluated and the auditor can determine whether or not to perform tests of controls. Reviewing audit workpapers is part of the process of making certain that the audit has been completed in conformity with GAAS.

What does Becker say?

[pharaoh]

d. An auditor interviews and observes appropriate personnel to
determine segregation of duties.
Explanation
Choice “d” is correct. Interviewing and observing appropriate personnel
to determine segregation of duties is a test of controls. Segregation of
duties is a subcomponent of the control activities component of internal
control.
Choice “c” is incorrect. An auditor's evaluation as to whether a journal
entry was recorded at the proper amount is a substantive test.

I use Roger too but Becker is making more sense on this one

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[Author]

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