When Designing Tests of Controls and Substantive Tests an Auditor

question 18

Essay

When designing tests of controls and substantive tests an auditor is gathering evidence to satisfy the transaction-related audit objectives. What are the four steps the auditor would normally follow to reduce assessed control risk?

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Definitions:

Securities and Exchange Commission

A U.S. federal agency responsible for enforcing federal securities laws and regulating the securities industry and the nation's stock and options exchanges.

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity, typically including balance sheets, income statements, and cash flow statements.

Constructive Fraud

Deception or misrepresentation made without the intent to deceive, usually due to neglect or failure to fulfill a duty, which causes harm to another party.

Grossly Negligent

A severe lack of care or the extreme departure from the care a reasonable person would exercise in a similar situation, often resulting in harm or damage.