Page 69 - Audit Day 3 - Class Slides

Test of Controls

• ISA 315 (revised) requires the auditor to obtain an understanding
of the accounting system and related internal controls. This

requirement by the ISA is very important, as it not only enables
the auditor to identify and assess the risk of material
misstatement at the client, but also allows the auditor to make a

preliminary assessment of the operating effectiveness of controls.

• Assuming that the auditor concludes that there is an expectation

that controls are operating effectively at the planning phase, the
auditor can then design further audit procedures based on tests
of controls to obtain audit evidence. These tests of controls
should also address the relevant assertions pertaining the

transactions, events, account balances and disclosures.

• As the auditor is only concerned with controls that have an

impact on the material misstatement of the financial statements,
the auditor will only consider testing such controls for operating
effectiveness and will not consider testing all controls at the

client.