Controls
This framework is used to help companies structure and evaluate their internal controls.
WHAT IS THE COSO FRAMEWORK OF INTERNAL CONTROL?
This type of sampling is used to estimate the extent to which a characteristic exists in a given population.
What is Attribute Sampling?
To ensure proper control over the confirmation process, bank confirmations are sent out and received by this party.
Who is the Auditor?
This test of detail provides the best opportunity to detect errors and fraud in inventory.
What is a Physical Inventory Observation?
This COSO framework component includes policies and procedures that ensure management’s directives are carried out.
What are control activities?
This assertion is most important in instances where overstatement is likely to occur, such as the accounts receivable and cash accounts.
What is Existence?
This type of internal control issue is one where the design or operation of the control does not allow for timely detection or prevention of a misstatement and is classified as the least severe type of IC issue.
What is Control Deficiency?
If the upper limit rate of deviation is equal to or below this permissible rate, the auditors know they can accept the controls in place as working properly.
What is the Tolerable Rate of Deviation?
This type of confirmation requires a response only when the balance is incorrect.
What is negative confirmation?
When performing a physical inventory observation, it is important that auditors obtain supporting documentation of shipping and receiving transactions around the time of the observation in order to ensure this.
What is proper cutoff?
When testing controls, auditors evaluate ____________ effectiveness by assessing whether the controls, if implemented as planned, would prevent or detect a material misstatement.
What is Design?
When testing whether the company inappropriately excluded outstanding checks from the bank statement, one is concerned with this assertion, as it relates to the outstanding check listing.
What is Completeness?
This level of control risk is issued by the auditor when controls do not pertain to an assertion or when testing controls are ineffective.
What is the maximum control risk (or high)?
If the upper limit rate of deviation is greater than the amount the auditors have determined they can accept to conclude the control is operating effectively, the auditors will do this as it relates to substantive testing.
What is increase substantive testing?
When testing bank reconciliations, an auditor is most likely to vouch items that fall into this category of reconciling item.
What are deposits in transit?
If an auditor selects an item from the detailed inventory listing, then goes onto the warehouse floor and counts the item selected, the auditor is primarily concerned with this assertion.
What is Existence?
Limiting access to purchased goods by keeping them in a secured location is an example of this type of control.
What is Physical Control (or restricted access control)?
An auditor is concerned that an account balance might be understated, they are most likely concerned about this assertion.
What is Completeness?
Human error, collusion, and this factor are all limitations of internal controls.
What is management override?
The idea that the selected sample is not representative of its population poses this type of risk.
What is sampling risk?
This type of bank statement is sent directly to the auditors and typically covers a ten to twenty day period after the year end financial statement date.
What is a Cutoff Bank Statement?
The valuation assertion is important for inventory largely because management must exercises high levels of judgment when assessing this type of inventory.
What is obsolete?
Expected population deviation rate has this type of relationship with sample size.
What is Direct?
When the auditor reviews vendor invoices and/or contracts to verify that goods in inventory are actually owned by the company, this assertion is being addressed.
What is Rights and Obligations?
This audit procedure provides the most persuasive evidence over the operating effectiveness when preforming tests of controls.
What is Reperformance?
Haphazard selection is considered a non-statistical sampling method because the auditors, rather than a random process, selected the samples
What is non-statistical sampling?
When reconciling a bank statement, one should add deposits in transit and subtract this item.
What are outstanding checks?
This type of transactional testing would be performed by auditors when inventory is counted at a time other than year-end, requiring them to extend their procedures to ensure transactions are recorded accurately up to the year-end date.
What is rollforward testing?
This type of substantive procedure never uses sampling as a way to gather information.
What are Substantive Analytics?
For a multinational company with significant operations abroad, the auditor evaluates whether foreign cash balances are properly translated and reported under U.S. GAAP to test this assertion.
What is Valuation & Allocation?
In variables sampling, this statistical measure is used to adjust the sample misstatement estimate to the upper end of the confidence interval, ensuring it does not exceed the tolerable misstatement.
What is the Upper Limit on Misstatements (ULM?)