22.Distinguish between tests of controls and substantive testing.

The tests of controls phase involves confirming the existence and effectiveness of internal controls. The
substantive testing phase entails an in-depth investigation of particular account balances and
transactions.

23 Define audit risk

audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial
statements are materially misstated

24 Distinguish between errors and irregularities. Which do you think concern auditors the most?

Errors are unintentional mistakes, whereas irregularities are deliberate misrepresentations

made to commit fraud or mislead financial statement users. Errors are frequently more simpler
to find than misrepresentations. As a result, auditors are frequently more worried about
whether they have discovered all anomalies. Also, auditors are considerably more concerned
with irregularities .

25.Distinguish between inherent risk and control risk. How do internal controls affect inherent risk and
control risk, if at all? What is the role of detection risk?

26.What is the relationship between tests of controls and substantive tests?

The relationship between substantive tests and tests of controls is directly related to the auditor's
assessing risk. Less extensive testing occurs the stronger the internal controls are.

27.SOX contains many sections. Which sections does this chapter focus on?

In accordance with SOX Sections 302 and 404, this chapter focuses on internal control and audit duties.

28.What control framework does the PCAOB recommend?

The PCAOB recommends using COSO as the model for control evaluation.

29 COSO identifies two broad groupings of information system controls. What are they?

The two broad groupings of information system controls recognized by COSO are application controls
and general controls.

30.What are the objectives of application controls?

 to ensure the validity, completeness, and accuracy of financial transactions.

31.Give three examples of application controls.

Transaction logging All transactions are identified with unique id and logged

Separation of business functions Transaction initiation and authorization done by separate individuals

An account receivable check digit procedure that validates customer account numbers on sales
transactions.
 1. Define general controls.
General controls govern the design, security, and use of computer programs General controls apply to
all systems. General controls needed to support functioning of

application controls. Both needed to ensure accurate

financial reporting

33.What is the meaning of the term attest services?

A practitioner is engaged to provide a written communication that communicates a conclusion about
the reliability of a written assertion that is the responsibility of another party.
34.List four general control areas.

a. It Govenance controls,

b. Security (data management controls),

c. Security (operating system and network controls),

d. systems development and program change controls