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CMA Intermediate · Corporate Accounting and Auditing · Audit Risk, Internal Control, Internal Check and Internal Audit

Which statement about manual and automated elements of internal control, as reflected in SA 315, is correct for an auditor who studies the entity's flow of transactions?

Under SA 315, manual elements of control may be more suitable where judgment and discretion are required, such as large, unusual or non-recurring transactions, and in monitoring automated controls. The characteristics of manual and automated elements are relevant to the auditor's risk assessment.

  1. AManual elements may be more suitable where judgment and discretion are required, such as large, unusual or non-recurring transactionsCorrect
  2. BAutomated elements are always more suitable for large, unusual or non-recurring transactions
  3. CManual elements are unsuitable for monitoring the effectiveness of automated controls
  4. DThe characteristics of manual or automated elements are irrelevant to the auditor's risk assessment

Explanation

SA 315 states that manual elements may be more suitable where judgment and discretion are needed, including large, unusual or non-recurring transactions and monitoring the effectiveness of automated controls. It also says the characteristics of both types are relevant to risk assessment, so the other options contradict the standard.

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