[NY.CPA.Someday]

I’m pretty confused about this statement from Becker:

“Tests of controls used in assessing control risk ordinarily include procedures such as inquiry of appropriate entity personnel, inspection of documents and reports indicating performance of the policy or procedure, observation of the application of the policy or procedure, and reperformance of the application of the policy or procedure by the auditor.”

I thought tests of controls were only applied after assessing control risk, not as part of assessing control risk. Don’t you assess control risk based on the design and implementation of controls that appear to be operating effectively and then perform tests of controls to ascertain their actual effectiveness? Why is this statement saying that tests of controls are used to assess control risk? I’m confused. Thanks.

FAR - 8/4 - 93
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REG - 10/3/10 - 93
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[HanahL]

These are not tests of controls (although they sound similar), rather they are risk assessment procedures.

The Wiley books says basically word for word the quote you have, and then writes: “At this point in the audit, the above procedures are performed primarily to help the auditor to understand the design and whether the controls have been implemented. AU 314 distinguishes between determining that controls have been implemented vs. evaluating their operating effectiveness.”

Hope this helps.

[NY.CPA.Someday]

Thank you very much Hanah. That's pretty much what I was assuming but there was no definitive statement in the Becker book stating that these are solely considered preliminary procedures rather than actual tests of controls for evaluating operating effectiveness. I greatly appreciate your clarification!

FAR - 8/4 - 93
AUD - 8/26/10 - 97
REG - 10/3/10 - 93
BEC - 11/21/10 - 82

[Author]

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