Question content area top

Part 1

State the four-step approach to designing tests of controls and substantive tests of transactions.

Question content area bottom

Part 1

The four-step approach to designing tests of controls and substantive tests of transactions is as follows: (Label the steps in the proper numerical order for the four-step approach [1, 2, 3, and 4]. If an item is not one of the four-steps, leave the input field empty.)

Design tests of details for a specific account balance to satisfy balance-related audit objectives.
Identify specific control policies and procedures that should reduce control risk for each transaction-related audit objective.
Understand the clients business and industry.
Design appropriate substantive tests of transactions considering deficiencies in internal control and expected results from test of controls for each key control.
Identify client business risks affecting the account balance.
Apply the transaction-related audit objectives to the class of transactions being tested.
Perform analytical procedures of the account balances.
Develop appropriate tests of controls for each key control.