Identify the appropriate answer related to the documenting of the understanding of the internal control.

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In performing a risk-based audit, when developing audit recommendations, the IT auditor should: a) Use Computer Assisted Audit Techniques (CAATs) to test transactions. b) Analyze the inherent risk, residual risk, and the cost of additional controls in relation to the potential for loss. c) Determine if the risk is material based solely on auditor judgement. d) Perform substantive procedures to eliminate control risk

Answer 1

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Chapter 7, Problem 35LOQ

To determine

Identify the appropriate answer related to the documenting of the understanding of the internal control.

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In performing a risk-based audit, when developing audit recommendations, the IT auditor should: a) Use Computer Assisted Audit Techniques (CAATs) to test transactions. b) Analyze the inherent risk, residual risk, and the cost of additional controls in relation to the potential for loss. c) Determine if the risk is material based solely on auditor judgement. d) Perform substantive procedures to eliminate control risk

explain .After documenting internal control in an audit engagement, the auditor may perform tests on Those controls that the auditor plans to rely on. Those controls in which deficiencies were identified. Those controls that have a material effect on the financial statement balances. A random sample of the controls that were reviewed.

A conceptually logical approach to the auditor's evaluation of internal control consists of the following four steps: I. Determining the internal controls that should prevent or detect errors and fraud. II. Identifying control deficiencies to determine their effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client. III. Determining whether the necessary internal control procedures are prescribed and are being followed satisfactorily. IV. Considering the types of errors and fraud that can occur. What should be the order in which these four steps are performed?