AUDITOR ASSESSES CONTROL RISK AS RELY OR NOT RELY ON CONTROLS

Auditor assesses control risk as Rely or Not rely on Controls.

 When making control risk assessments, consider:

•  The control environment’s influence over internal control. A control environment that supports the prevention, and detection and correction, of material misstatements allows greater confidence in the reliability of internal control and audit evidence generated within the entity. However it does not guarantee the effectiveness of specific controls. We therefore, test the operating effectiveness of controls over significant class of transactions (SCOTs) when we plan to take a controls reliance strategy. Conversely, the control environment may undermine the effectiveness of specific controls and is a key factor in our control risk assessments. 
•  Evaluations of the related IT processes that support application and IT-dependent manual controls. 
• Our testing approach over SCOTs and disclosure processes (i.e., controls reliance or substantive only strategy). 
• The expectation of the operating effectiveness of controls based on the understanding of entity’s processes.