Chapter 13, Problem 20.3MCQ

A conceptually logical approach to the auditor’s evaluation of internal control consists of the following four steps:

1. (I) Determining the internal controls that should prevent or detect and correct errors and fraud.
2. (II) Identifying control deficiencies to determine their effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client.
3. (III) Determining whether the necessary internal control procedures are prescribed and are being followed satisfactorily.
4. (IV) Considering the types of errors and fraud that can occur.

What should be the order in which these four steps are performed?

1. (1) I, II, III, and IV
2. (2) I, III, IV, and II
3. (3) III, IV, I, and II
4. (4) IV, I, III, and II