[greeneyesCPA]

Which of the following procedures would provide an auditor with evidence about whether an entity’s internal control activities are sutably designed to prevent or detect material misstatements?

a. reperform the activities for a sample of transactions

b. perform analytical procedure using data aggregated at a high level

c. vouching a sample of transactions directly related to the acitivities

d. observing the entity’s personnel applying the activities

Please let me know why you picked your answer. 🙂

FAR Passed
BEC Passed
AUD Passed
REG Passed

[Anonymous]

I'm going to say “d” just b/c I remember Gary saying something about that in a lecture, but I really don't really know why it's better than reperformance.

[shiggity80]

Going with “d” as well. Observing is a more reliable source of information since the auditor is personally watching the activities, and not reading it from a flowchart provided by the client or something.

FAR: 87
AUD: 86
BEC: 86
REG: 84! Officially Done!

[jkey57]

C – Vouching is sued to examine evidence

Off the top of my head:

Not “A”, doesn't make sense. Re-performing the same activities will give you the same results.

Not “B”, You only use a high level of data when planning

Not “D”, Observation is part of RAP (risk assessment procedures) and is used for Understanding an entity and its IC

I'm going with C

[greeneyesCPA]

When you evaluate the design of control, you are determining whether its able to prevent or detect material misstatment. At first I thought “C” for vouching, but that is incorrect as vouching is for looking for original sources of documentation for support, to prove it actually occured. “D” is correct because observing helps the auditor understand whether the design of a control works or not.

These questions can be confusing, especially if you have no experience.

FAR Passed
BEC Passed
AUD Passed
REG Passed

[Anonymous]

AU §314.55 (https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00314.pdf)

“Procedures to obtain audit evidence about the design and implementation of relevant controls may include inquiring of entity personnel, observing the application of specific controls, inspecting documents and reports, and tracing transactions through the information system relevant to financial reporting. Inquiry alone is not sufficient to evaluate the design of a control relevant to an audit and to determine whether it has been implemented.”

According to the standard it appears C and D are acceptable answers, but I choose D because it seems more right.

[kmwgrace]

I was thinking D as well b/c I had a lot of MCQ's from Becker about this type of thing and observing the personnel was usually the right answer – as a pp said, it's more reliable than reperformance & the other answers are incorrect for the reasons given by other posters in this thread.

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[jkey57]

Sounds good and thanks for the question. I've only been studying this stuff for about 2.5 weeks (never took an auditing class), so I'm just glad I was in the right ballpark…

[Anonymous]

D

[Givemesleep]

According to Roger the way you test ARCCS is to use RIO reperform, inspect and observe. Since arccs is segregation of duties, and not internal controls I think its C. But also think I failed Aud.

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[greeneyesCPA]

Just to make sure everyone is aware, the “correct” answer is “D” (according to Becker).

FAR Passed
BEC Passed
AUD Passed
REG Passed

[jelly]

A&C – these are likely transactions that have passed, so they wouldn't trigger controls designed to detect or prevent misstatements. These procedures would be for substantive testing.

B – for analytical review. Makes no sense.

D – The other answers don't make sense, so this is somewhat a “remaining” answer left choice. Observing a person performing the action also shows that the control operates and functions (but necessarily if it's good at catching crazy transactions or data). You could also test to see if the control works by giving the personnel or computer system aberrant data that would (or should) cause an exception.

Couldn't pass again!

[Author]

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