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Canada (161,562)
MGAD10H3 (23)
Kevin Ha (16)
Chapter 8

Chapter 8 _ Execution of the audit _ testing of controls.docx

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Financial Accounting
Kevin Ha

Chapter 8 – Execution of the audit – testing of controls 1. Identify the different types of controls 2. Understand the different techniques for testing controls 3. Explain how to select and design tests of controls 4. Understand how to interpret the results of testing of controls 5. Explain how to document tests of controls CAS 230 – audit documentation CAS 260 – communication with those charged with governance CAS 265 – communicating deficiencies in internal control to those charged with governance and management CAS 315 – identifying and assessing the risks of material misstatement through understanding the entity and its environment 8.1 – types of controls  Controls have two main objectives: to prevent or detect misstatements or to support the automated parts of the business in the functioning of the controls in place 8.1.1 – preventive and detective controls  Preventive controls – WCGWs  Controls may not provide evidence of control (i.e. signatures do not guarantee review)  Detective controls should: completely and accurately capture all relevant data, identify all potentially significant errors, performed consistently and regularly, and include timely follow-up (i.e. management reviews, performance indicators, reconciliations, reports showing transactions)  Preventive controls are programming driven, whereas detective controls are physical evidence driven  Detective controls do rely heavily on preventive controls 8.1.2 – manual and automated controls  Manual controls (i.e. locked safe for cash)  ITGCS – clients controls over the hardware and software it uses, including acquisition and maintenance of equipment, backup, and recovery procedures, and the organization of the IT department to ensure the appropriate segregation of duties o Program change controls – only appropriately authorized, tested, and approved changes are made to programs o Logical access controls – only authorized personnel have access to IT equipment
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