A)Discuss What Is Meant by the Term "Control Environment" and Identify

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The Answer is A)The control environment consists of the actions,policies,and procedures that reflect the overall attitudes of top management,directors,and owners of an entity about control and its importance to the entity.Subcomponents include:
1.demonstrate commitment to integrity and ethical values.
2.board of directors exercises oversight responsibility.
3.management establishes structure,authority,and responsibility.
4.commitment to competence.
5.organization establishes and enforces accountability.
6.organization specifies relevant objectives.
7.identifies and assesses risks.
8.considers the potential for fraud in assessing risk.
9.identifies and assesses significant changes.
10.selects and develops control activities.
11.selects and develops general controls over technology.
12.deploys policies and procedures.
13.obtains or generates relevant,quality information.
14.communicates internally.
15.communicates externally.
B)Management's steps include:
•identify factors that may increase risk.
•estimate the significance of risks.
•assess the likelihood that risks would occur.
•develop specific actions that need to be taken to reduce the risk to an acceptable level.
C)The auditor:
•determines how management identifies risk relevant to financial reporting.
•evaluates the significance of these risks.
•evaluates the likelihood of the risks occurring.
•decides what evidence is required pertaining to the risks.
Questionnaires and discussions with management are the most common ways to obtain this understanding.
D)Management's risk assessment process is focused on the identification and analysis of risks relevant to the preparation of financial statements in conformity with an applicable financial reporting framework.Management assesses risks as a part of designing and operating internal controls to minimize errors and fraud.Auditors assess risks to decide the evidence needed in the audit.
E)There is an inverse relationship: If management effectively assesses and responds to risks,the auditor will typically accumulate less evidence than when management fails to identify or respond to significant risks.

A)Discuss What Is Meant by the Term "Control Environment" and Identify

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A)Discuss What Is Meant by the Term "Control Environment" and Identify

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Correct Answer:
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