Acca aa s21 Notes

6. Tests of controls
6.1. Direct v indirect controls
The auditor may plan to test: 
๏
direct controls (i.e. that are sufficiently precise to prevent, detect or correct misstatements); 
๏
indirect controls (i.e. that support direct controls) including general IT controls (see Chapter 14).
Controls in the control environment, risk assessment process and monitoring process are primarily 
indirect
controls (but may also be direct). Controls in the information system and communication 
and control activities are primarily 
direct
controls (but may also be indirect).
6.2 Audit procedures
Internal controls can be tested using the following procedures:
Inspection
Look at a evidence of internal control procedures. For 
example, inspect the file of paid supplier invoices to see if 
they have indeed been stamped or initialed to indicate that 
they had been paid.
Observation 
Watch employees as they carry out certain transactions and 
procedures. Of course, employees would be on their best 
behaviour if they knew they were being observed.
Reperformance 
For example, reperform what the employees have done to 
make sure that they have done it correctly.
* IMPORTANT 
note: Enquiry is required as a risk assessment procedure but is never sufficient to test 
the operating effectiveness of controls. Therefore other audit procedures must always be performed 
in combination with enquiry. Enquiry + inspection or reperformance is better than enquiry + 
observation (at a point in time).
September 2021 to June 2022 exams
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