Aura V6 Click an area to zoom in Testing considerations Print

Production & Inventory CpM

Control Title Control Title Assertion(s) Control Title Assertion(s)
IPOs IPOs
C1. Business performance reviews - C4. Standing data change controls - C7. Physical access to inventory is restricted
User assigned C A V C A CO E/O R&O P&D V R C E/O
Production & Inventory† Production & Inventory [SAP] [Or11i]
C8. Use of service organization – Production & Inventory
C2. Segregation of duties - Production & Inventory [Or12] User assigned
R C A CO E/O R&O P&D V
Process-wide [SAP] [Or11i] [Or12] [AX] [NAV] C5. System posts production & inventory C9. Use of internal audit function – Production & Inventory
C3. Access rights are reviewed by management - transactions based on a pre-defined A A User assigned Process-wide
considerations R E/O C10. ERP automated/configurable control considerations –
Production & Inventory [AX] account mapping [SAP] [Or11i] considerations
Production & Inventory A A
[Or12] [AX] [NAV]
C6. Relevant source systems are C11. Accounting policies are reviewed for compliance with
† A customizable Direct ELC for business performance reviews that can relate to more than C A C A the applicable financial reporting framework – Production A P&D V
one sub-process is included within Process-wide considerations of the Aura Controls Library reconciled - Production & Inventory
& Inventory

Adjustments &
Receiving Production & costing Shipping
period-end close

Control Title IPOs Assertion(s) Control Title IPOs Assertion(s) Control Title IPOs Assertion(s) Control Title IPOs Assertion(s)
C26. Production labor costs are reviewed for completeness C A
C12. Manual comparison of quantity received and and accuracy C40. System prevents negative C48. Account analysis of details and adjustments – Production
A A C A P&D
external shipping document inventory balances [SAP] [Or11i] C A A E/O & Inventory [SAP] [Or11i] [Or12]
C27. Overhead costs are reviewed for completeness and C A CO
C13. Goods received are matched to authorized receipt [Or12] [NAV] C49. Production inventory metrics [AX] [NAV] C A CO E/O
V E/O accuracy [SAP] [Or11i] [Or12]
document A V A E/O
C41. System creates packing lists C50. Analysis of the inventory sub-ledger to assess the
C28. Management reviews and approves variances for C A CO V
C14. Quantity receipt exception report is reviewed [NAV] A A based on approved sales orders reasonableness of the inventory reserve [SAP] C A V
completeness and accuracy [SAP]
C15. System updates inventory quantities upon receipt C42. Comparison of goods packed to A V A E/O C51. Analysis of the inventory margins to assess the
A A C29. System calculates variance allocations to/from inventory A A V
shipping document reasonableness of the lower of cost or market (LCM) C A V
C16. Purchase orders and return authorizations are [SAP]
A A A A R&O C43. System closes sales orders reserve
closed by the system upon goods receipt [AX] [NAV] C30. System updates quantities based on movements during C E/O
when all goods are shipped and C52. Adjustments are approved – Production & Inventory [AX] A V A E/O R&O P&D
C17. System updates the inventory sub-ledger based on the production process [SAP]
A CO C A C A prevents additional shipments [NAV]
the physical receipt date C31. Manual comparison of total materials requested and against the sales order A V C A CO E/O
transferred to production C53. Comparison between adjustments posted and source
C18. Receiving documents are sequentially numbered C C E/O A A V C44. System relieves inventory A A R&O
documents – Production & Inventory
C19. System populates costs in the return authorization C32. System applies costs from cost master file [SAP] [Or11i] quantity based on shipment [AX]
A A [Or12] [AX] [NAV] C54. Comparison of items on a list of period-end recurring C C CO
based on original inventory transaction A A V C45. System updates shipments for
A CO entries to entries recorded – Production & Inventory
C20. System updates inventory costs in the sub-ledger C33. Manual application of costs from cost master file [AX] the correct accounting period
A A A A V based on the shipment date C55. Physical inventory count; quantities compared to sub- C A V C A E/O
based on the return authorization costs when goods C34. System applies the correct costing methodology [SAP] C C E/O ledger [NAV]
are received [NAV] [Or11i] [Or12] [AX] [NAV] C46. Shipments are complete [AX] C A V C E/O
A A C V C E/O R&O C56. Manual comparison between the consignee inventory
C21. Manual comparison between cost on the return C35. Production labor hours are reconciled C47. Shipment activity is reconciled
A A detail and the consignor inventory detail [NAV]
authorization and original inventory transaction A A C A V C A E/O
C36. Comparison of standard cost changes to approved C57. Inventory held at third-parties are confirmed or physically
C22. Product return exception report is reviewed A A
source documentation [NAV] A V A inspected
C23. Aged return authorizations exception report is C C C37. Review of updated standard costs in the master file C A V C A E/O
C A A E/O C58. Cycle counts are performed in accordance with policy
reviewed
V E/O C38. Inventory balances are reviewed for negative quantities [SAP] [Or11i] [Or12] [AX] [NAV]
C24. Review of non-standard contracts C A V C A E/O
[SAP] [Or11i] [Or12] [NAV] A V A C59. Quantity adjustments are reviewed and approved [SAP]
C25. Reconciliations of in transit inventory are completed C A V E/O R&O
C39. Periodic review of standard costs [Or11i] [Or12]
and reviewed C E/O
Revenue & Sales Order C60. Consigned inventory on hand is segregated [Or11i] [Or12]
Receivables
A V V
Property, Production Purchase Requisition Purchase &
C61. Management reviews and approves write-offs
Plant & 18
Planning Payables
Equipment Purchase
Bill of
Materials
C62. Sub-ledgers are reconciled to the general ledger – C A C A
Orders Sales Order Production & Inventory [SAP] [Or11i] [Or12]
Create WIP Production Order
Purchase &
Payables Inventory
Production Order
C63. Review and approval of general ledger reconciliations – C A C A CO E/O R&O P&D V
Receiving Subledger
Purchase Production & Inventory [AX] [NAV]
Document
& Payables
Sales Return Production Order Manufacture R&O V
Revenue &
Receivables
Authorization Receive Goods Product Revenue & Pick & Assemble Pick List C64. Management reviews and approves reserves related to
Sales Return
Revenue &
Receivables Order slow-moving, obsolete or damaged goods
Receipt R&O V
Receivables
30,38 C65. Management reviews and approves reserves related to
Vendor Bill of
Lading Shipping 40,41,42
the valuation of inventory
12,13,14,15, System
Update Product Inventory Perform Cyclical
16,19,20,21,22 Quanities or Periodic 55,56,57,58,59,60
System
Inventory Counts
Receiving Costing Method Standard 31,32,33,34 Inventory Shipping
Document Shipping
Subledger Ship Inventory Documents Close Inventory
Update Inventory
System Inventory
Cost Subledger and General
Update Master
Actual Cost Costing Subledger Post to G/L Ledger
Inventory (at Std Costs )
Inventory Master
Subledger
Sales Return Purchase & 31,32,33,34 General
Receipt Ledger Revenue &
Payables Purchase & 29 43,44,45,46
Receivables 61
Inventory Payables
Update Inventory Subledger
Payroll Costing (at Actual Calculate
17,23,24,25 Costs ) Variances
Payroll Shipping
General Reserve Inputs Prepare Adjusting
Documents
Ledger Entries
36,37
Inventory Inventory
Prepare Costing Inventory
Adjustments Subledger
Subledger Subledger
Inventory
Subledger Inventory Prepare Costing 52,61,64,65
Record Adjustments Record Inventory
Subledger
Inventory
Record Costing Inventory
Adjustments Inventory General
General Subledger Subledger
Record Costing Ledger
General Ledger
Record Adjusting
Adjustments
Ledger 47 Entries
26,27
General
Ledger
26,27,28,35,38,39 General
Ledger
Controls highlighted in burgundy are included in the Standard Business Processes – Less Complex Systems controls library. 48,49,50,51,53,
54,62,63,64,65
PwC ControlprocessMate (CpM) 12a
Aura V6 Click here to return Testing considerations Print
Production & Inventory CpM
Control Title Control Title Assertion(s) Control Title Assertion(s)
IPOs IPOs
C1. Business performance reviews - C4. Standing data change controls - C7. Physical access to inventory is restricted
User assigned C A V C A CO E/O R&O P&D V R C E/O
Production & Inventory† Production & Inventory [SAP] [Or11i]
C8. Use of service organization – Production & Inventory
C2. Segregation of duties - Production & Inventory [Or12] User assigned
R C A CO E/O R&O P&D V
Process-wide [SAP] [Or11i] [Or12] [AX] [NAV] C5. System posts production & inventory C9. Use of internal audit function – Production & Inventory
C3. Access rights are reviewed by management - transactions based on a pre-defined A A User assigned Process-wide
considerations R E/O C10. ERP automated/configurable control considerations –
Production & Inventory [AX] account mapping [SAP] [Or11i] considerations
Production & Inventory A A
[Or12] [AX] [NAV]
C6. Relevant source systems are C11. Accounting policies are reviewed for compliance with
† A customizable Direct ELC for business performance reviews that can relate to more than C A C A the applicable financial reporting framework – Production A P&D V
one sub-process is included within Process-wide considerations of the Aura Controls Library reconciled - Production & Inventory
& Inventory

Process-wide Control Title IPOs Assertion(s)

considerations C1. Business performance reviews – Production &
User assigned
Inventory†

C2. Segregation of duties – Production & Inventory [SAP] R C A CO E/O R&O P&D V
[Or11i] [Or12] [AX] [NAV]

C3. Access rights are reviewed by management –

Production & Inventory [AX] R E/O

C4. Standing data change controls – Production & Inventory C A V C A CO E/O R&O P&D V
[SAP] [Or11i] [Or12]

C5. System posts production & inventory transactions based

A A
on a pre-defined account mapping [SAP] [Or11i] [Or12]
[AX] [NAV]

C6. Relevant source systems are reconciled – Production &

C A C A
Inventory

C7. Physical access to inventory is restricted R C E/O

C8. Use of service organization – Production & Inventory User assigned

C9. Use of internal audit function – Production & Inventory
User assigned
C10. ERP automated/configurable control considerations -
A A
Production & Inventory

C11. Accounting policies are reviewed for compliance

A P&D V
with the applicable financial reporting framework –
Production & Inventory

† A customizable Direct ELC for business performance reviews that can relate to more than
one sub-process is included within Process-wide considerations of the Aura Controls Library

Controls highlighted in burgundy are included in the Standard Business Processes – Less Complex Systems controls library.
PwC ControlprocessMate (CpM) 12a
Aura V6 Click here to return Testing considerations Print
Production & Inventory CpM
Control Title Control Title Assertion(s) Control Title Assertion(s)
IPOs IPOs
C1. Business performance reviews - C4. Standing data change controls - C7. Physical access to inventory is restricted
User assigned C A V C A CO E/O R&O P&D V R C E/O
Production & Inventory† Production & Inventory [SAP] [Or11i]
C8. Use of service organization – Production & Inventory
C2. Segregation of duties - Production & Inventory [Or12] User assigned
R C A CO E/O R&O P&D V
Process-wide [SAP] [Or11i] [Or12] [AX] [NAV] C5. System posts production & inventory C9. Use of internal audit function – Production & Inventory
C3. Access rights are reviewed by management - transactions based on a pre-defined A A User assigned Process-wide
considerations R E/O C10. ERP automated/configurable control considerations –
Production & Inventory [AX] account mapping [SAP] [Or11i] considerations
Production & Inventory A A
[Or12] [AX] [NAV]
C6. Relevant source systems are C11. Accounting policies are reviewed for compliance with
† A customizable Direct ELC for business performance reviews that can relate to more than C A C A the applicable financial reporting framework – Production A P&D V
one sub-process is included within Process-wide considerations of the Aura Controls Library reconciled - Production & Inventory
& Inventory

Adjustments &
Receiving Production & costing Shipping
period-end close

Control Title IPOs Assertion(s)

C12. Manual comparison of quantity received A Property, 18

A
and external shipping document Plant &
Receiving Equipment Purchase
C13. Goods received are matched to authorized
V E/O Orders
receipt document
Purchase &
C14. Quantity receipt exception report is Payables Receiving
A A Purchase &
reviewed [NAV] Document Payables
Revenue & Sales Return Receive
C15. System updates inventory quantities Receivables Authorization Goods
A A Sales Return
upon receipt Revenue &
Receipt Receivables
C16. Purchase orders and return authorizations Vendor Bill of
are closed by the system upon goods A A
Lading
receipt [AX] [NAV] 12,13,14,15,16,
19,20,21,22
C17. System updates the inventory sub-ledger A CO
based on the physical receipt date
Receiving
C18. Receiving documents are sequentially Document
C C E/O
numbered Update Inventory
Inventory Subledger
C19. System populates costs in the return Sales Return
authorization based on original A A
Receipt
inventory transaction

C20. System updates inventory costs in the

sub-ledger based on the return A A 17,23,24,25
authorization costs when goods are
received [NAV]
A A Inventory
C21. Manual comparison between cost on the
return authorization and original inventory Subledger
transaction Record
Inventory
C22. Product return exception report is A A
reviewed General
C C Ledger
C23. Aged return authorizations exception
report is reviewed
V E/O
C24. Review of non-standard contracts

C25. Reconciliations of in transit inventory are C A V E/O R&O

completed and reviewed

Controls highlighted in burgundy are included in the Standard Business Processes – Less Complex Systems controls library.
PwC ControlprocessMate (CpM) 12a
Aura V6 Click here to return Testing considerations Print
Production & Inventory CpM
Control Title Control Title Assertion(s) Control Title Assertion(s)
IPOs IPOs
C1. Business performance reviews - C4. Standing data change controls - C7. Physical access to inventory is restricted
User assigned C A V C A CO E/O R&O P&D V R C E/O
Production & Inventory† Production & Inventory [SAP] [Or11i]
C8. Use of service organization – Production & Inventory
C2. Segregation of duties - Production & Inventory [Or12] User assigned
R C A CO E/O R&O P&D V
Process-wide [SAP] [Or11i] [Or12] [AX] [NAV] C5. System posts production & inventory C9. Use of internal audit function – Production & Inventory
C3. Access rights are reviewed by management - transactions based on a pre-defined A A User assigned Process-wide
considerations R E/O C10. ERP automated/configurable control considerations –
Production & Inventory [AX] account mapping [SAP] [Or11i] considerations
Production & Inventory A A
[Or12] [AX] [NAV]
C6. Relevant source systems are C11. Accounting policies are reviewed for compliance with
† A customizable Direct ELC for business performance reviews that can relate to more than C A C A the applicable financial reporting framework – Production A P&D V
one sub-process is included within Process-wide considerations of the Aura Controls Library reconciled - Production & Inventory
& Inventory

Adjustments &
Receiving Production & costing Shipping
period-end close

Control Title IPOs Assertion(s)

C26. Production labor costs are reviewed for C A Revenue & Sales Order
completeness and accuracy Receivables
Production & costing C27. Overhead costs are reviewed for completeness C A CO
Production Purchase Purchase &
and accuracy [SAP] [Or11i] [Or12] Bill of Requisition
Planning Payables
Materials
C28. Management reviews and approves variances C A CO V
for completeness and accuracy [SAP]
Create WIP Production Order
Inventory
C29. System calculates variance allocations to/from A A V Production Order
Subledger
inventory [SAP]
C30. System updates quantities based on A A R&O Production Order Manufacture
movements during the production process [SAP] Product

C31. Manual comparison of total materials requested C A C A

and transferred to production 30,38

C32. System applies costs from cost master file [SAP] A A V

[Or11i] [Or12] [AX] [NAV] Update Product Inventory
Quanities
C33. Manual application of costs from cost A A V
System
master file [AX]
C34. System applies the correct costing Actual Costing Method Standard
A A V
methodology[SAP] [Or11i] [Or12] [AX] [NAV]
Cost 31,32,33,34 Cost 31,32,33,34
C35. Production labor hours are reconciled A A
Master Master
Inventory
Inventory
Update Inventory Subledger Purchase & Update Inventory Subledger
C36. Comparison of standard cost changes to A A Purchase &
Payables Costing
Costing
approved source documentation [NAV] Payables (at Std Costs )
(at Actual Costs ) General
General
C37. Review of updated standard costs in the A V A Ledger 29 Ledger
Payroll Payroll
master file
C38. Inventory balances are reviewed for negative C A Calculate
A E/O
quantities [SAP] [Or11i] [Or12] [NAV] Variances
C39. Periodic review of standard costs A V A
36,37

Inventory Prepare Costing

Adjustments Prepare Costing
Subledger Inventory
Inventory Adjustments
Subledger
Subledger Inventory
Record Costing Subledger
Adjustments Record Costing
Adjustments
General
Ledger General
26,27 26,27,28,35,38,39 Ledger

Controls highlighted in burgundy are included in the Standard Business Processes – Less Complex Systems controls library.
PwC ControlprocessMate (CpM) 12a
Aura V6 Click here to return Testing considerations Print
Production & Inventory CpM
Control Title Control Title Assertion(s) Control Title Assertion(s)
IPOs IPOs
C1. Business performance reviews - C4. Standing data change controls - C7. Physical access to inventory is restricted
User assigned C A V C A CO E/O R&O P&D V R C E/O
Production & Inventory† Production & Inventory [SAP] [Or11i]
C8. Use of service organization – Production & Inventory
C2. Segregation of duties - Production & Inventory [Or12] User assigned
R C A CO E/O R&O P&D V
Process-wide [SAP] [Or11i] [Or12] [AX] [NAV] C5. System posts production & inventory C9. Use of internal audit function – Production & Inventory
C3. Access rights are reviewed by management - transactions based on a pre-defined A A User assigned Process-wide
considerations R E/O C10. ERP automated/configurable control considerations –
Production & Inventory [AX] account mapping [SAP] [Or11i] considerations
Production & Inventory A A
[Or12] [AX] [NAV]
C6. Relevant source systems are C11. Accounting policies are reviewed for compliance with
† A customizable Direct ELC for business performance reviews that can relate to more than C A C A the applicable financial reporting framework – Production A P&D V
one sub-process is included within Process-wide considerations of the Aura Controls Library reconciled - Production & Inventory
& Inventory

Adjustments &
Receiving Production & costing Shipping
period-end close

Control Title IPOs Assertion(s)

C40. System prevents negative inventory C A A E/O

Sales Order
balances [SAP] [Or11i] [Or12] [NAV]
Shipping C41. System creates packing lists based on A V A E/O
approved sales orders
C42. Comparison of goods packed to shipping A V A E/O
document Revenue & Pick & Assemble Pick List
C43. System closes sales orders when all Receivables Order
C E/O
goods are shipped and prevents additional
shipments against the sales order
C44. System relieves inventory quantity based on Shipping 40,41,42
A A R&O System
shipment [AX]
C45. System updates shipments for the correct
A CO Shipping
accounting period based on the shipment Shipping Ship Inventory Documents
date System
C C E/O
C46. Shipments are complete [AX]
C47. Shipment activity is reconciled C V C E/O R&O

43,44,45,46 Revenue &

Receivables

Shipping
Documents

Inventory
Subledger

Record Inventory

General
Ledger
47

Controls highlighted in burgundy are included in the Standard Business Processes – Less Complex Systems controls library.
PwC ControlprocessMate (CpM) 12a
Aura V6 Click here to return Testing considerations Print
Production & Inventory CpM
Control Title Control Title Assertion(s) Control Title Assertion(s)
IPOs IPOs
C1. Business performance reviews - C4. Standing data change controls - C7. Physical access to inventory is restricted
User assigned C A V C A CO E/O R&O P&D V R C E/O
Production & Inventory† Production & Inventory [SAP] [Or11i]
C8. Use of service organization – Production & Inventory
C2. Segregation of duties - Production & Inventory [Or12] User assigned
R C A CO E/O R&O P&D V
Process-wide [SAP] [Or11i] [Or12] [AX] [NAV] C5. System posts production & inventory C9. Use of internal audit function – Production & Inventory
C3. Access rights are reviewed by management - transactions based on a pre-defined A A User assigned Process-wide
considerations R E/O C10. ERP automated/configurable control considerations –
Production & Inventory [AX] account mapping [SAP] [Or11i] considerations
Production & Inventory A A
[Or12] [AX] [NAV]
C6. Relevant source systems are C11. Accounting policies are reviewed for compliance with
† A customizable Direct ELC for business performance reviews that can relate to more than C A C A the applicable financial reporting framework – Production A P&D V
one sub-process is included within Process-wide considerations of the Aura Controls Library reconciled - Production & Inventory
& Inventory

Adjustments &
Receiving Production & costing Shipping
period-end close

Control Title IPOs Assertion(s)

C48. Account analysis of details and adjustments – C A P&D Perform Cyclical

Production & Inventory [SAP] [Or11i] [Or12]
Adjustments & or Periodic
C49. Production inventory metrics [AX] [NAV] C A CO E/O Inventory Counts
period-end close C50. Analysis of the inventory sub-ledger to assess the
reasonableness of the inventory reserve [SAP] C A V
C51. Analysis of the inventory margins to assess the C A V
reasonableness of the lower of cost or market 55,56,57,58,59,60
(LCM) reserve
C52. Adjustments are approved – Production & Inventory A V A E/O R&O P&D
[AX] [NAV]
C53. Comparison between adjustments posted and source Inventory Close Inventory General
A V C A CO E/O
documents – Production & Inventory Subledger Subledger and Ledger
C54. Comparison of items on a list of period-end recurring Post to G/L
C C CO
entries to entries recorded – Production & Inventory
C55. Physical inventory count; quantities compared to C A V C A E/O
sub-ledger [NAV]
61
C56. Manual comparison between the consignee inventory C A V C E/O
detail and the consignor inventory detail [NAV]
C57. Inventory held at third-parties are confirmed or C A V C A E/O
physically inspected
Reserve Inputs Prepare Adjusting
C58. Cycle counts are performed in accordance with policy C A V C A E/O Entries
[SAP] [Or11i] [Or12] [AX] [NAV]
C59. Quantity adjustments are reviewed and approved C A V C A E/O
[SAP] [Or11i] [Or12]
C60. Consigned inventory on hand is segregated C E/O 52,61,64,65
[Or11i] [Or12]
Inventory
C61. Management reviews and approves write-offs A V V Subledger
C62. Sub-ledgers are reconciled to the general ledger –
C A C A Record Adjusting
Production & Inventory [SAP] [Or11i] [Or12] Entries
C63. Review and approval of general ledger reconciliations
C A C A CO E/O R&O P&D V
– Production & Inventory [AX] [NAV]
General
C64. Management reviews and approves reserves related R&O V Ledger
to slow-moving, obsolete or damaged goods 48,49,50,51,53,54,
C65. Management reviews and approves reserves related 62,63,64,65
R&O V
to the valuation of inventory

Controls highlighted in burgundy are included in the Standard Business Processes – Less Complex Systems controls library.
PwC ControlprocessMate (CpM) 12a
Testing considerations Click here to return Testing considerations Print

Evaluating Design Effectiveness Extent of Testing

The effectiveness of the design of a control in any organization is Knowledge and experience of the people involved in We design tests of controls to obtain sufficient appropriate audit · The extent to which audit evidence is obtained from tests of
dependent on a range of factors and judgment is needed. These performing the controls. evidence that controls operated effectively throughout the period others controls related to the assertion (e.g., the control
environment or information technology general controls);
factors include the following: of reliance. The more extensively a control is tested, the greater · The competence of the personnel who perform the control or
Follow up actions taken by the entity. For a control to be
the evidence obtained from that test. monitor its performance and whether there have been changes
Alignment between the controls and the business and effective, there needs to be adequate follow up of issues and
The extent of validation of the controls we seek to rely on will vary in key personnel who perform the control or monitor
audit risks identified. Our evaluation will focus on whether the exceptions, in a timely manner. its performance;
business processes and related controls appear to be effective in depending on the type of control we plan to validate and the · Whether the control relies on performance by an individual
Segregation of duties relevant to the process being
achieving management’s stated objectives and managing the factors indicated below. When deciding on the extent of our direct or is automated (i.e., an automated control would generally
controlled.
related risks. testing of controls, we should consider the following factors that be expected to be lower risk if relevant information technology
Reliability of the information used in the performance of affect the risk associated with a control: general controls are effective);
Accomplishment of information processing objectives. · The nature, timing, and extent of procedures performed in
the control. We should understand how management gets · The nature and materiality of misstatements that the control is
We determine whether the control helps to satisfy the information previous audits;
assurance that financial information is reliable. intended to prevent or detect; · The results of the previous years’ testing of the control;
processing objectives of completeness, accuracy, validity and · The inherent risk associated with the related account(s) and
restricted access. Period covered by the control. For audit purposes, we may need · Whether we are engaged to audit shorter period financial
assertion(s); statements (e.g. where an entity has been formed during the
to obtain evidence that a control is effective for the reporting period. · The assessed level of susceptibility of the control to
Nature of the control, including its level of year) or to audit both annual financial statements and shorter
management override; period financial statements for the same year. For shorter
disaggregation. For example, a high-level business performance Consistency and timeliness of the control. This will affect
· Whether there have been changes in the volume or nature of periods the sample size is selected based on the assumed
review may provide some assurance across a range of assertions, whether the control will detect or prevent the risk identified on a transactions that might adversely affect control design or population of the control. Refer to PwC Audit 6053 for
but detailed information processing controls may provide more timely basis. operating effectiveness; guidance; and
assurance over specific assertions. · Whether the account has a history of errors; · Whether there has been change in the design or operation of
· The effectiveness of entity-level controls, especially controls that the controls.
Frequency of the control. This will affect whether the control monitor other controls;
will detect or prevent the risk identified on a timely basis. In some · The nature of the control and the frequency with which it operates; We should vary the nature, timing, and extent of testing of controls
cases, a detective control may be adequate, but in other cases, · The level of manual oversight or judgment associated with from year to year to introduce unpredictability into the testing and
the control; respond to changes in circumstances.
the entity should ensure there are adequate preventive controls.

Nature of Testing Considering Whether Evidence Is Available for the Whole Period
The nature of testing refers to the purpose (tests of controls or Inspection (examination of evidence) often is used to determine When the auditor obtains audit evidence about the operating · Automated controls are not subject to random failures or
substantive procedures) and the type (inspection of information/ whether manual controls, like the follow-up of exception reports, effectiveness of controls during an interim period, the auditor deterioration over time, provided that relevant Information
data, inspection of tangible assets, observation, inquiry, are being performed. Evidence could include written explanations, should determine what additional audit evidence should be Technology General controls are operating effectively. Testing
reperformance, analytical procedures) of audit procedures. check marks, or other indications of follow-up documented on obtained for the remaining period. We need evidence for the the continued operation of effective monitoring of controls in the
the exception report itself. We should examine evidence of the whole period on which we need to rely. information systems and technology area during the remaining
There are four main techniques relevant to testing controls, each
performance of a control when it might reasonably be expected period may provide sufficient evidence about the effective
providing a different level of evidence. Combining these can Deciding on the nature and extent of additional testing, if any,
to exist. Absence of evidence may indicate that the control is not operation of IT general controls over maintenance, information
provide more audit evidence than using only one technique. We for a given control is a matter of judgment based on the above
operating as prescribed and further procedures will be necessary security and computer operations activities.
should perform other audit procedures in combination with inquiry considerations. Additional audit evidence may be obtained by
to test the operating effectiveness of controls.
to determine whether there is in fact an effective control. · We may consider limiting our testing in the remaining period to
extending the testing of controls over the remaining period, or
Reperformance generally provides better evidence than the other inquiries about a controls continued operation and examination
considering the entity’s monitoring of controls. In deciding on the
Inquiry – asking our client about controls – provides us with some of evidence indicating that the control was performed, e.g.,
techniques and is therefore used when a combination of inquiry, specific tests needed to gain the required assurance with regard
relevant information, especially when we apply professional reviewing annotated copies of reports and/or follow-up
observation and examination of evidence does not provide sufficient to the remaining period, we should consider:
skepticism in the discussions. However, inquiry alone will not communications.
assurance that a control is operating effectively. However, if
provide sufficient evidence to support a conclusion about the · Management’s monitoring of controls, such as managements · Spreading tests throughout the remaining period is not always
extensive reperformance is likely to be necessary, we should
effectiveness of a specific control. We usually need to get further monitoring of the effectiveness of exception report reviews. necessary where controls are cumulative, e.g., reviewing and
reconsider whether it is efficient to perform tests of controls
support, by corroborating inquiry with others in the entity, or by Testing such controls in the remaining period may provide following up an exception report that lists items until such time
to restrict the scope of substantive testing. If we consider
examining reports, manuals, or other documents used in or evidence of the continued operation of control activities. as they are resolved, or the reconciliation of control accounts to
reperformance is appropriate, we should remember that it is the
generated by the performance of the control. Accordingly, while · Operation of high-level control activities. Testing the continued the related detail. In such cases, tests that provide evidence that a
performance of the control that we are assessing and not the
inquiry can be useful, it is best used in combination with other operation of control activities performed by management at high control operated effectively at the year-end also may provide
existence or accuracy of specific transactions. Because we are
control testing techniques, by applying the show me process. levels in the organization during the remaining period may evidence about its operation during the remaining period.
reperforming a control, it is not necessary to select high value
Observation is an appropriate way to obtain evidence if there is provide evidence about the effective operation of controls at
items for testing or to select different types of transactions, if they
no documentation of the operation of a control, like segregation lower levels, both automated and manual. These controls may be
are processed using the same controls.
of duties. Observation is also useful for physical controls, e.g., high level business performance reviews operated by senior
seeing that the warehouse door is locked, or that blank checks management.
are safeguarded. Generally, evidence we obtain directly, such as · Manual controls are more prone to random failures than
through observation, provides more assurance than that obtained automated controls. Where we seek audit evidence from such
indirectly or by inference, such as through inquiry. We need to controls, we should obtain evidence of their continued operation
consider, however, that the control we observe might not be considering such factors as the frequency of reports, the number
performed in the same manner when we are not present. of people exercising the control, and the number of locations at
which the control is exercised.

PwC ControlprocessMate (CpM) 12b