Auditing and Attestation Simulation 1

Pablo's Art and Crafts, a publicly traded company, is being audited by Cook and Cook CPAs. For each of the questions below, select the best answer from the choices provided by clicking on the appropriate button.  Only one answer can be selected for each question.

1. In an audit of Pablo's financial statements in accordance with generally accepted auditing standards, the auditor is required to do all of the following except:

a.  Document his or her understanding of Pablo's internal control.

b.  Understand the design of Pablo's relevant controls.

c.  Determine whether Pablo's internal controls have been implemented.

d.  Evaluate the operating effectiveness of Pablo's internal controls.

Choice d is correct.  An auditor is not required to evaluate the operating effectiveness of internal controls unless the auditor is planning to rely on these controls.

Choices a, b and c are incorrect.  As part of planning, an auditor is required to obtain and document an understanding of internal control  This understanding should include both the design of controls and whether they have been implemented.