BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Design Effectiveness Score x Operative Effectiveness Score
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Design Effectiveness Score / Operative Effectiveness Score
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Square of (Design Effectiveness Score x Operative Effectiveness Score)
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Square root of (Design Effectiveness Score x Operative Effectiveness Score)
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Detailed explanation-1: -Procedures the auditor performs to test design effectiveness include a mix of inquiry of appropriate personnel, observation of the company’s operations, and inspection of relevant documentation. Walkthroughs that include these procedures ordinarily are sufficient to evaluate design effectiveness.
Detailed explanation-2: -Internal controls fall into three broad categories: detective, preventative, and corrective.
Detailed explanation-3: -Although the objective of a test of controls is different from the objective of a test of details, both may be accomplished concurrently by performing a test of controls and a test of details on the same transaction, also known as a dual-purpose test.
Detailed explanation-4: -The risk of assessing control risk too low is the risk that the assessed level of control risk, based on the sample results are lower than the actual risk based on the actual operating effectiveness of those controls. This will result in under-testing substantive procedures, and over-reliance on internal controls.