[Anonymous]

An auditor’s risk assessment is based on the assumption that controls are operating

effectively. Which of the following was not a step in making this assessment?

a. Obtain an understanding of the entity’s accounting system and control environment.

b. Perform tests of details of transactions to detect material misstatements in the financial

statements.

c. Consider Whether control activities can have a pervasive effect on financial statement

assertions.

d. Evaluate the effectiveness of the internal controls with tests of controls.

Ans: “b” is correct. Tests of details of transactions are used to detect material misstatements in the financial statements after the auditor has assessed risk, not as part of making this assessment.

Can someone please give me a flow chart of planning of the audit, as in what is done after what? If I follow Becker’s IMACPA, M stands for material misstatement and A stands for assessment of risk. On the contrary to the answer, i see material misstatement is checked before assessment of risk. Or is there two stages of risk checking? First at the beginning and the after checking the material misstatement again?

Can someone please shed some light? I am badly confused. thanks.

[acamp]

Maybe someone else can get more in depth, but for the quick on this question–choice B *is* auditing, not planning.

Performing substantive detail testing is performing the audit, not planning the audit.

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California CPA

[Author]

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