After Obtaining an Understanding of a Client's IT Control, an Auditor

question 76

Multiple Choice

After obtaining an understanding of a client's IT control, an auditor may decide not to perform tests of controls within the IT portion of the client's system. Which of the following would not be a valid reason for choosing to omit tests of controls?

• A) There appear to be major deficiencies that preclude reliance on the stated procedure.
• B) The time and dollar costs of testing controls exceed the savings in substantive testing if the tests show the controls to be operative.
• C) The controls appear to be adequate and thus can be relied upon in assessing the level of control risk.
• D) The controls duplicate controls existing elsewhere in the system.

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Definitions:

High Inflation

A situation where prices for goods and services rise rapidly over a period, eroding purchasing power and potentially destabilizing the economy.

Crowding-Out Effect

Large federal budget deficits are financed by Treasury borrowing, which then crowds private borrowers out of financial markets and drives up interest rates.

Full Employment

A situation in which all available labor resources are being used in the most economically efficient way, minimizing unemployment to only frictional or structural levels.

Serious Recession

A significant period of economic decline across the economy that lasts more than a few months, typically evident in real GDP, real income, employment, industrial production, and wholesale-retail sales.