Exam 8: Internal Control and Control Risk

Which of the following is NOT typically one of management's concerns in designing effective internal controls?

An example of a monitoring activity would be reviewing complaints from customers.

The auditor's primary objective to obtain an understanding of internal control is that it must provide:

All of the following are characteristics of an accounting information system EXCEPT:

When internal controls are not effective, then substantive audit tests are less reliable; thus, the extent of substantive tests should be increased.

Describe three inherent limitations of internal control.

The procedures for proper record- keeping should be spelled out in:

The procedures to test effectiveness of control policies and procedures in support of a lower assessment of control risk are called:

List, in order, the steps in the auditor's process of understanding internal control and assessing control risk.

Adequate documents and records are important for effective internal control. There are five principles that dictate the proper design and use of documents and records. Discuss each of these principles of adequate documents and records.

The less control risk there is, the smaller the amount of planned substantive evidence required.

Which of the following is NOT an objective of management in designing internal control systems?

Each key control that the auditor intends to rely on must be supported by sufficient:

Discuss 'monitoring activities' and give an example.

Authorisations can be either general or specific. Which one of the following is NOT an example of a general authorisation?

If the auditor wants a lower assessed control risk:

There is a distinction between authorisation and approval. Approval is a policy decision for a general class of transactions. Authorisation is the implementation of management's general authorisation decisions.

An important part of effectiveness and efficiency of controls is safeguarding assets and records. This refers to:

Of the three objectives management has when designing an effective system of internal control, the objective that auditors are primarily concerned with is the client's compliance with applicable laws and regulations.

The financial statements are NOT likely to correctly reflect applicable accounting standards if: