In planning a controls engagement, an auditor decides to first evaluate whether the organisation's approval control is capable of preventing unauthorised purchases if it works as intended, before later testing whether it actually functioned across the year. What is the auditor evaluating in the first step?
- AThe operating effectiveness of the approval control, because the auditor is confirming that the control worked consistently throughout the reporting period.
- BThe design effectiveness of the approval control, because the auditor is assessing whether it is suitably designed to prevent unauthorised purchases if operated as intended. Correct
- CThe efficiency of the approval control, because the auditor is measuring whether it processes purchase approvals at an acceptable cost per transaction.
- DThe materiality of the approval control, because the auditor is deciding whether unauthorised purchases would be large enough to influence a decision.
Why A is wrong: Tempting because operating effectiveness is the eventual goal, but the stem describes the first step of judging whether the control could work as intended, which precedes testing whether it actually did over time.
Why B is correct: Correct because evaluating whether a control could achieve its objective when working as intended is a design assessment, which logically precedes testing whether it operated effectively over the period.
Why C is wrong: Tempting because efficiency sounds like a control attribute, but it concerns cost and speed, not whether the control is capable of preventing unauthorised purchases, which is the design question posed.
Why D is wrong: Tempting because materiality guides scoping, but it concerns the significance of potential misstatement, not whether the control is capable of preventing the purchases, which is a design question.