Modern Auditing: Modern Auditing: Assurance Services and the Assurance Services and the Integrity of Financial Reporting, Integrity of Financial Reporting, 8 8 th th Edition Edition William C. Boynton William C. Boynton California Polytechnic State California Polytechnic State University at San Luis Obispo University at San Luis Obispo Raymond N. Johnson Raymond N. Johnson Portland State University Portland State University Chapter 11 – Audit Procedures in Response to Assessed Risks: Tests of Controls
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Modern Auditing:Modern Auditing:Assurance Services and the Assurance Services and the
Integrity of Financial Reporting, 8Integrity of Financial Reporting, 8thth EditionEdition
William C. BoyntonWilliam C. BoyntonCalifornia Polytechnic State California Polytechnic State
University at San Luis ObispoUniversity at San Luis ObispoRaymond N. Raymond N.
JohnsonJohnsonPortland State UniversityPortland State University
Chapter 11 – Audit Procedures in Response to Assessed Risks: Tests of Controls
Chapter 11 OverviewChapter 11 Overview
Assessing Control RiskAssessing Control RiskIn assessing control risk, the
auditor must evaluate the effectiveness of :
• Design of internal controls
• Operation of internal controls
Steps in Assessing Control Steps in Assessing Control RiskRisk
Process for Assessing Control Process for Assessing Control RiskRisk
• Consider Knowledge Acquired from Procedures to Obtain an Understanding
• Identify Potential Misstatements
Process for Assessing Control Process for Assessing Control RiskRisk
• Identify Necessary Controls– Nature of controls to prevent or detect
and correct misstatements
– Nature of controls implemented by management
– Significance of each control
– Risk that designed controls may not operate effectively
Control Design for Specific Control Design for Specific AssertionsAssertions