An auditor is testing the design effectiveness of a control. Which of the following procedures is MOST appropriate?

Answer options:

Reperforming the control for a sample of 40 transactions.

Observing the performance of the control and inspecting relevant documentation to determine if it can prevent or detect misstatements.

Inquiring of management regarding the control's consistency.

Performing analytical procedures on the account balance.

How to approach this question

Design vs Operating Effectiveness. Design: Does it look like it would work? (One item/Walkthrough). Operating: Did it work all year? (Sample).

Full Answer

B.Observing the performance of the control and inspecting relevant documentation to determine if it can prevent or detect misstatements.✓ Correct

Observing the performance of the control and inspecting relevant documentation to determine if it can prevent or detect misstatements.

Evaluating design effectiveness involves determining whether the control, if operated as prescribed, satisfies the control objective. This is typically done through observation, inspection, and walkthroughs, not extensive sampling.

Common mistakes

Confusing Design (Theory) with Operating Effectiveness (Practice/Consistency).

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