ACC 491 Internal Controls, Audit Techniques, and Sampling Methods in Auditing

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ACC 491Internal Controls, Audit Techniques, and Sampling Methods in AuditingACC 491Week 5Individual Assignments From the TextLearning Check11-6a. Briefly describe three strategies for testing internal controls when informationtechnology is used for significant accounting processing.The three strategies for testing internal controls when information technology is usedforsignificant account processing are:(1) assessing control risk based on user controls, (2) planningfor a low control risk assessment based on application controls, (3) planning for a high controlrisk assessment based on general controls and manualfollow-up.b. Identify two strategies that might be used to support a low control riskassessment.Discuss the difference between the two strategies.Two strategies that might be used to support a low control risk assessment are the user controlsand the application controls. When testing user controls auditors can test the controls directlyand there is no need to test the complexity of computer programs. When testing the applicationcontrols, auditors must test the computer application controls, the computer general controls, andtest the manual follow-up or exceptions noted by application controls.c. Discuss a third audit strategy that might be used to assess control risk ata high level.Explain why this strategy will not support a low control riskassessment.The third audit strategy that might be used to assess control risk at a high level is the generalcontrols and manual follow-up procedures. This strategy will not support a low control riskassessment because it is a detailed test where the auditor learns about the effectiveness generalcontrols and manual follow-up procedures. In addition, while testing general controls the auditoralso learns about the effectiveness of the design and testing of application controls.Learning Check 11-8What are the advantages and disadvantages of the computer-assisted audit techniqueknown as parallel simulation?Some advantages of parallel simulation are that the auditor can verify data by tracing them tosource documents and approvals, the sample size can be greatly expanded at little costs, and theauditor can run the test independently. Some disadvantages of parallel simulation is that there isa possibility that the client’s system may perform operations that are beyond the capacity of theauditor’s software, and the auditors have to make sure that the data selected for simulations arerepresentative of actual client transactions.Learning Check 11-9

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