ExpertMedium1 markMultiple Choice
CPA · Question 23 · Area III: Performing Procedures
An auditor is testing the operating effectiveness of a control that requires the credit manager to approve all sales over $10,000. The auditor selects a sample of 50 sales over $10,000. The auditor finds that for 2 items, the credit manager's signature is missing, but the credit manager claims to have verbally approved them. How should the auditor classify these items?
An auditor is testing the operating effectiveness of a control that requires the credit manager to approve all sales over $10,000. The auditor selects a sample of 50 sales over $10,000. The auditor finds that for 2 items, the credit manager's signature is missing, but the credit manager claims to have verbally approved them. How should the auditor classify these items?
Answer options:
A.
As effective controls, provided the customer paid the invoice.
B.
As deviations from the control.
C.
As non-deviations, provided the auditor can verify the customer's credit limit was adequate.
D.
As voided items, and replace them with new sample items.
How to approach this question
Test of Controls = Did the control happen? If the rule is 'Sign the paper', and the paper isn't signed, the control failed (deviation).
Full Answer
B.As deviations from the control.✓ Correct
In a test of controls, the auditor looks for evidence that the control was applied. If the control requires a signature and it is missing, it is a deviation. The fact that the transaction turned out okay (customer paid) does not mean the control worked.
Common mistakes
Confusing substantive correctness (customer paid) with control effectiveness (procedure followed).
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