AUD: What does this mean?

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  • #192145
    Anonymous
    Inactive

    “The lower the assessed level of control risk, the less assurance the evidence must provide that the control activities are operating effectively.”

    NINJA #328

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  • #647684
    Anonymous
    Inactive

    I'm not really sure a better way to word it…

    If control risk is assessed lower – i.e. there is a less likely chance of a misstatement occurring that is not detected and corrected or prevented by the entity's internal control mechanism. Than the auditor would not need to acquire as much evidence that the control activities are operating effectively.

    If control risk is assessed higher the auditor would need more assurance from the evidence that the control activities are operating effectively because there is a higher risk that the internal control mechanism may allow a misstatement to occur without being detected or corrected.

    That is simply my understanding, and I'm not sure if that is what you were really after.

    You will probably get more responses to the question in the AUD study group sticky.

    #647685
    Anonymous
    Inactive

    If control risk is low (great controls) then you don't need great substantive evidence to assure you that there aren't mistatements.

    #647686
    Anonymous
    Inactive

    Here's something to ruin my day… Haha. I just went to work questions and this was my first one.

    __________________________________________________________________________________________________

    Which of the following statements is correct concerning an auditor's assessment of control risk?

    A. Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity's internal control.

    B. Evidence about the operation of control activities in prior audits may not be considered during the current year's assessment of control risk.

    C. The basis for an auditor's conclusions about the assessed level of control need not be documented unless control risk is assessed at the maximum level.

    D. The lower the assessed level of control risk, the less assurance the evidence must provide that the control activities are operating effectively.

    _____________________________________________________________________________________________________

    The correct answer is A.

    The auditor may obtain audit evidence about the effectiveness of both the design and operation of control activities that supports a lower assessed level of control risk for some assertions. Such audit evidence may be obtained from tests of controls planned and performed concurrently with obtaining the understanding or from procedures performed to obtain the understanding that were not specifically planned as tests of controls.

    Although some risk assessment procedures that the auditor performs to evaluate the design of controls and to determine that they have been implemented may not have been specifically designed as tests of controls, they may nevertheless provide audit evidence about the operating effectiveness of the controls and, consequently, serve as tests of controls.

    ____________________________________________________________________________________________________

    So what's the deal with D? I know that a lot of the times with AUD questions you must look for the “most correct” and I originally picked A but then changed my mind to D based on what I thought I understood from this conversation. I'm going to post this in the study group for hopefully more insight.

    #647687
    Anonymous
    Inactive

    Conflicting questions. I bet I got this wrong on the exam. I'm sunk

    #2758464
    Sam
    Participant

    I thought the exact same thing. But the explanation makes more sense when you flip the sentence around; the less assurance the evidence has to provide, the lower we can say the risk is – this is clearly wrong! If we're going to assess the control risk as low, we need to make sure we have more evidence to support that assessment. Similarly, if we are going to assess the risk as high, we don't need more evidence to prove that point; we're already documenting that this area has a high risk.

    BEC - 90 (7/19, 8 weeks)
    FAR - 78 (10/19, 10 weeks)
    AUD - 75 (12/19, 8 weeks)
    REG - 90 (7/20, ~12 weeks, split up)

    Ethics - 97 (~6 hours to go through the material & take the quiz)
    Licensed in Virginia (10/20, ~1.5 weeks to process after submitting everything)

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