Tests of Design and Tests of Effectiveness
Differentiating between Design Tests and Effectiveness Tests may seem straightforward; however, based on previous students’ examinations, these concepts seem to be elusive.
The purpose of this assignment is for you to clarify your understanding of these concepts.
1.Explain the following concepts in your own words. Do not use any quotes in your explanations.
- Internal Control Design Test
- Internal Control In-Effect Test
- Internal Control Effectiveness Test
Do this in no more than 5 sentences per Test; however, 2 or 3 sentences are better than 5. In other words, do not write a paper; just define the Test.
In the case of the Design Test, how do you confirm the adequacy of the Design of the Internal Control?
Clearly differentiate between the In Effect Test and the Effectiveness Test.
- Linford & Co is a midwestern CPA firm. Googling Internal Controls, previous students have landed on Linford’s webpages. See the 2 items below:
- In the past, Linford & Co llp associated the Test of Design with a Balance Sheet. Does this make sense? Explain your answer
- “In summary, testing the design of a control is a ‘point in time’ test.(1) Testing the operating effectiveness of an internal control is testing the control operation over a period of time (typically looking back 12 months), which would require sample testing.”
Linford & Co. makes several assertions regarding Tests of Design and Tests of Effectiveness. Please reconcile the two Linford & Co assertions with class discussion.
1.If the Effectiveness Test concludes that the Internal Control is not effective, what factors might cause the ineffectiveness of the Internal Control?
Submission Form and Format:
- Limit your response to a single single-spaced page.
- Use the outline above for your response, i.e., Q01, Q02, Q03.
- Format your response suitable for submission to a Board and business executives, i.e., no “white paper”
（What is ‘White Paper?’ White paper is exactly that, a blank sheet of paper with nothing on it, which is the problem. Supposing you prepared a report for work, submitted it and the recipient had no idea from whom it came. Why, because it was on ‘white paper.’ How would the recipient know from whom it came?
‘White paper’ is a blank sheet. Whenever, wherever, you submit a document, a report, an EXCEL spreadsheet, include at least the following:
- Date and
- Page numbering
I prefer Page x of y, where x is the page number and y is the total number of pages. In Microsoft office, these are both automatic fields.
How this is done depends on the situation. Does the business have an established format for its documents? If not, then use your own format. Regardless of the format, have a standard for your work. When I was a student, all papers had to follow the Tarabian (U of Chicago) format. I don’t know if that is still the case.
However, having a format for your documents, is an excellent professional practice. From there, you can adapt to the local situations as needed.
Pick a format. Decide on the items to include. Adapt to a local standard if there is one. In any case, no more ‘white paper’ submissions. — Jerry Savin）