Question 1

What procedures are normally used by the auditor to obtain an understanding of internal controls?

Accepted Answer

The auditor normally obtains an understanding of the internal control structure by:
1.reviewing previous experience with the client
2.inquiring of appropriate management, supervisory, and staff personnel
3.inspecting documents and records
4.observing entity activities and operations
5.tracing transactions through the information and communication system

Question 2

To minimize the risks associated with on-line entry/batch processing, some companies use memo updating of the master file at the time of data entry.

Accepted Answer

A) True 
 B)False  False

Question 3

From a control standpoint, which one of the following is a benefit of IT systems over manual systems?

Accepted Answer

A)  information in machine-sensible form only 
B)  decrease in human involvement 
C)  reduction in documentation 
D)  consistency in processing 
E)  a more distinct transaction trail 
A)  information in machine-sensible form only 
B)  decrease in human involvement 
C)  reduction in documentation 
D)  consistency in processing 
E)  a more distinct transaction trail D

Question 4

The Foreign Corrupt Practices Act is administered by the Federal Trade Commission.

Accepted Answer

A) True 
 B)False

Question 5

General authorization relates to the granting of the authorization on a case by case basis.

Accepted Answer

A) True 
 B)False

Question 6

The COSO report concludes that a few key people in an organization has some responsibility the organization's internal controls.

Accepted Answer

A) True 
 B)False

Question 7

Some auditors associate controls related to recording transactions in the correct accounting period with a separate objective identified as the extension objective.

Accepted Answer

A) True 
 B)False

Question 8

In the example system of cash receipts, the cashier prepares the bank deposit slip and makes the daily bank deposit.

Accepted Answer

A) True 
 B)False

Question 9

A major focus of the accounting system is on transactions.

Accepted Answer

A) True 
 B)False

Question 10

Management's risk assessment should include the following special consideration of the risks that can arise from changed circumstances except:

Accepted Answer

A)  new personnel. 
B)  rapid growth. 
C)  new technology. 
D)  corporate restructurings. 
E)  domestic operations. 
A)  new personnel. 
B)  rapid growth. 
C)  new technology. 
D)  corporate restructurings. 
E)  domestic operations.

Question 11

Legislators and regulators establish minimum statutory and regulatory requirements for the establishment of internal controls by certain entities.

Accepted Answer

A) True 
 B)False

Question 12

All internal control systems are subject to inherent limitations.

Accepted Answer

A) True 
 B)False

Question 13

1.What is the purpose of general controls?
2.Why are general controls important to the auditor?
3.What is the purpose of application controls?

Accepted Answer

1.The purpose of general controls

Question 14

Match between columns
                        Premises: Performance reviews
Commitment to competence
System should provide a complete audit or transaction trail
Integrity and ethical values
Access controls
Changes in operating environment
Board of directors and audit committee
Segregation of duties
Organizational structure
Reporting exceptions for follow-up
Management’s philosophy and operating style
Internal audit function
Physical controls
New accounting pronouncements
Assignment of authority and responsibility
Human resource policies and procedures
Organization and operation control
Input controls
Data and procedural controls
Processing controls

Accepted Answer

The Answer of control environment and risk assessment and information is...

Question 15

Parity check involves transmitting data received by an output device back to the source unit for comparison with the original data.

Accepted Answer

A) True 
 B)False

Question 16

A report that summarizes gross margin by region is an example of a procedure review.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following requires managements of pubic companies to assess the adequacy of internal controls over financial reporting and further requires their auditors to audit management's assessment of internal controls over financial reporting and the actual effectiveness of the system of internal controls?

Accepted Answer

A)  Foreign Corrupt Practices Act 
B)  Securities Exchange Act of 1934 
C)  SAS 55, Consideration of the Internal Control Structure in a Financial Statement Audit 
D)  Section 404 of Sarbanes-Oxley 
E)  PCAOB Standard No. 9 
A)  Foreign Corrupt Practices Act 
B)  Securities Exchange Act of 1934 
C)  SAS 55, Consideration of the Internal Control Structure in a Financial Statement Audit 
D)  Section 404 of Sarbanes-Oxley 
E)  PCAOB Standard No. 9

Question 18

Organization and operation controls address risks related to the authorization, completeness, and accuracy of transactions.

Accepted Answer

A) True 
 B)False

Question 19

The organizational structure of a company is usually depicted graphically in an organization chart.

Accepted Answer

A) True 
 B)False

Question 20

Computer general controls represent a lower level of controls.

Accepted Answer

A) True 
 B)False

What procedures are normally used by the auditor to obtain an understanding of internal controls?

To minimize the risks associated with on-line entry/batch processing, some companies use memo updating of the master file at the time of data entry.

From a control standpoint, which one of the following is a benefit of IT systems over manual systems?

The Foreign Corrupt Practices Act is administered by the Federal Trade Commission.

General authorization relates to the granting of the authorization on a case by case basis.

The COSO report concludes that a few key people in an organization has some responsibility the organization's internal controls.

Some auditors associate controls related to recording transactions in the correct accounting period with a separate objective identified as the extension objective.

In the example system of cash receipts, the cashier prepares the bank deposit slip and makes the daily bank deposit.

A major focus of the accounting system is on transactions.

Management's risk assessment should include the following special consideration of the risks that can arise from changed circumstances except:

Legislators and regulators establish minimum statutory and regulatory requirements for the establishment of internal controls by certain entities.

All internal control systems are subject to inherent limitations.

1.What is the purpose of general controls? 2.Why are general controls important to the auditor? 3.What is the purpose of application controls?

Parity check involves transmitting data received by an output device back to the source unit for comparison with the original data.

A report that summarizes gross margin by region is an example of a procedure review.

Organization and operation controls address risks related to the authorization, completeness, and accuracy of transactions.

The organizational structure of a company is usually depicted graphically in an organization chart.

Computer general controls represent a lower level of controls.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 10: Understanding Internal Controls

What procedures are normally used by the auditor to obtain an understanding of internal controls?

To minimize the risks associated with on-line entry/batch processing, some companies use memo updating of the master file at the time of data entry.

From a control standpoint, which one of the following is a benefit of IT systems over manual systems?

The Foreign Corrupt Practices Act is administered by the Federal Trade Commission.

General authorization relates to the granting of the authorization on a case by case basis.

The COSO report concludes that a few key people in an organization has some responsibility the organization's internal controls.

Some auditors associate controls related to recording transactions in the correct accounting period with a separate objective identified as the extension objective.

In the example system of cash receipts, the cashier prepares the bank deposit slip and makes the daily bank deposit.

A major focus of the accounting system is on transactions.

Management's risk assessment should include the following special consideration of the risks that can arise from changed circumstances except:

Legislators and regulators establish minimum statutory and regulatory requirements for the establishment of internal controls by certain entities.

All internal control systems are subject to inherent limitations.

1.What is the purpose of general controls? 2.Why are general controls important to the auditor? 3.What is the purpose of application controls?

Parity check involves transmitting data received by an output device back to the source unit for comparison with the original data.

A report that summarizes gross margin by region is an example of a procedure review.

Organization and operation controls address risks related to the authorization, completeness, and accuracy of transactions.

The organizational structure of a company is usually depicted graphically in an organization chart.

Computer general controls represent a lower level of controls.

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters