Question 1

The echo 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 2

The IT Manager's primary responsibilities include maintaining custody of systems documentation, programs and files.

Accepted Answer

A) True 
 B)False

Question 3

Under the Foreign Corrupt Practices Act, management and directors are both subject to fines, penalties, and/or imprisonment.

Accepted Answer

A) True 
 B)False

Question 4

When planning an audit of internal controls over financial reporting, the auditor needs a comprehensive knowledge of the company and its environment. This knowledge might include:

Accepted Answer

A)  preliminary judgments about the results of operations. 
B)  assessments about the efficiency of operations. 
C)  conclusions about the effectiveness of internal controls. 
D)  an assessment of the effectiveness of the audit committee. 
E)  legal or regulatory matters of which the company is aware. 
A)  preliminary judgments about the results of operations. 
B)  assessments about the efficiency of operations. 
C)  conclusions about the effectiveness of internal controls. 
D)  an assessment of the effectiveness of the audit committee. 
E)  legal or regulatory matters of which the company is aware.

Question 5

Which of the following is not one of the characteristics of management's philosophy and operating style?

Accepted Answer

A)  approach to taking and monitoring business risks 
B)  monitoring policies for developing and modifying accounting systems 
C)  conscientiousness and conservatism in developing accounting estimates 
D)  its attitudes and actions toward financial reporting 
E)  its attitudes toward information processing and accounting functions and personnel 
A)  approach to taking and monitoring business risks 
B)  monitoring policies for developing and modifying accounting systems 
C)  conscientiousness and conservatism in developing accounting estimates 
D)  its attitudes and actions toward financial reporting 
E)  its attitudes toward information processing and accounting functions and personnel

Question 6

The COSO report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is:

Accepted Answer

A)  monitoring. 
B)  risk assessment. 
C)  information and communication. 
D)  control activities 
E)  antifraud programs and controls 
A)  monitoring. 
B)  risk assessment. 
C)  information and communication. 
D)  control activities 
E)  antifraud programs and controls

Question 7

Incompatible duties are those that allow an irregularity to be perpetrated:

Accepted Answer

A)  and concealed by a single employee. 
B)  and concealed through collusive actions. 
C)  by a single employee. 
D)  by accounting personnel. 
E)  and concealed by a group of two or more employees. 
A)  and concealed by a single employee. 
B)  and concealed through collusive actions. 
C)  by a single employee. 
D)  by accounting personnel. 
E)  and concealed by a group of two or more employees.

Question 8

The auditor's primary interest in the control environment is on the:

Accepted Answer

A)  effectiveness of detailed policies and procedures that have been built into the system. 
B)  pervasive effects that the attitudes and actions of management may have on the effectiveness of other internal controls. 
C)  existence of external factors such as absentee owners and/or regulators such as the SEC. 
D)  impact that the economic environment will have upon client operations. 
E)  classes of transactions in the entity's operations that are significant to the financial statements. 
A)  effectiveness of detailed policies and procedures that have been built into the system. 
B)  pervasive effects that the attitudes and actions of management may have on the effectiveness of other internal controls. 
C)  existence of external factors such as absentee owners and/or regulators such as the SEC. 
D)  impact that the economic environment will have upon client operations. 
E)  classes of transactions in the entity's operations that are significant to the financial statements.

Question 9

Which of the following is not considered an access control?

Accepted Answer

A)  the use of a librarian 
B)  management review of computer utilization reports 
C)  parity check 
D)  the use of passwords 
E)  limited access to data files and programs 
A)  the use of a librarian 
B)  management review of computer utilization reports 
C)  parity check 
D)  the use of passwords 
E)  limited access to data files and programs

Question 10

An effective accounting system should measure the value of transactions in a manner that permits recording their proper monetary value in the financial statements, which relates to the:

Accepted Answer

A)  rights and obligations assertion. 
B)  presentation and disclosure assertion. 
C)  valuation or allocation assertion. 
D)  existence or occurrence assertion. 
E)  completeness assertion. 
A)  rights and obligations assertion. 
B)  presentation and disclosure assertion. 
C)  valuation or allocation assertion. 
D)  existence or occurrence assertion. 
E)  completeness assertion.

Question 11

Security measures include limiting access to storage areas to authorized personnel.

Accepted Answer

A) True 
 B)False

Question 12

The auditor would expect a lesser degree of segregation of duties in a small company than in a large company.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following management responsibilities is not established under PCAOB standards?

Accepted Answer

A)  To present a written assessment of the effectiveness of the company's internal control over financial reporting as of the end of the company's most recent fiscal year. 
B)  To accept responsibility for the effectiveness of the company's internal control over financial reporting. 
C)  To evaluate the effectiveness of the company's internal control over financial reporting using suitable criteria. 
D)  To perform cost-benefit analysis with respect to internal controls relating to assertions having a material effect on the financial statements. 
E)  To support it's evaluation of internal control with sufficient evidence, including documentation. 
A)  To present a written assessment of the effectiveness of the company's internal control over financial reporting as of the end of the company's most recent fiscal year. 
B)  To accept responsibility for the effectiveness of the company's internal control over financial reporting. 
C)  To evaluate the effectiveness of the company's internal control over financial reporting using suitable criteria. 
D)  To perform cost-benefit analysis with respect to internal controls relating to assertions having a material effect on the financial statements. 
E)  To support it's evaluation of internal control with sufficient evidence, including documentation.

Question 14

Why is a preliminary audit strategy important to the auditor?

Accepted Answer

A greater understanding of internal cont

Question 15

In obtaining an understanding of the ABC Company's internal control structure, you discover the following circumstances:
1.The cashier makes bank deposits and records all cash transactions.
2.Raw materials are stored in an unlocked warehouse.
3.Prenumbered receiving reports are not used in the receiving department.
4.Monthly statements of account are sent to customers by personnel who maintain the accounts in the accounts receivable ledger.
5.Accounts receivable ledger clerks write-off accounts as uncollectible when they are more than 90 days past due.
6.The shipping department orally notifies the billing department that goods have been shipped.
7.The treasurer approves bills for payment, prepares the checks, and signs the checks.
8.Petty cash counts are made periodically by the petty cash custodian.
9.The company does not have a chart of accounts.
10.Each employee has direct access to his/her payroll records.
REQUIRED: For each circumstance, indicate from the list below, which category the control procedure that has been violated belongs to:Control Procedures Categories:
A.Segregation of duties
B.Physical controls
C.Documents and records
D.Independent checks
E.Proper authorization

Accepted Answer

A.Segregation of duties
B.Physical contr

Question 16

In order to emphasize the importance of integrity and ethical values among all personnel or an organization, the CEO and other top managers should do all of the following except:

Accepted Answer

A)  set the tone by example. 
B)  communicate to all employees. 
C)  send email messages to all employees promoting ethical values. 
D)  reduce or eliminate incentives and temptations. 
E)  provide moral guidance to employees. 
A)  set the tone by example. 
B)  communicate to all employees. 
C)  send email messages to all employees promoting ethical values. 
D)  reduce or eliminate incentives and temptations. 
E)  provide moral guidance to employees.

Question 17

Distinguish between the transaction trail and a transaction walk-through review.

Accepted Answer

1.A transaction trail is a chain of evid

Question 18

For planning purposes, obtaining an understanding of internal controls involves performing procedures to understand the design of policies and procedures and:

Accepted Answer

A)  to evaluate their effectiveness. 
B)  to determine their impact on the audit strategy. 
C)  to ascertain whether they are operating as described. 
D)  to determine whether they have been placed in operation. 
E)  to assess their efficiency. 
A)  to evaluate their effectiveness. 
B)  to determine their impact on the audit strategy. 
C)  to ascertain whether they are operating as described. 
D)  to determine whether they have been placed in operation. 
E)  to assess their efficiency.

Question 19

Which of the following systems programs perform common data processing tasks?

Accepted Answer

A)  utility programs 
B)  operating systems 
C)  compilers 
D)  assemblers 
E)  database management systems 
A)  utility programs 
B)  operating systems 
C)  compilers 
D)  assemblers 
E)  database management systems

Question 20

Which of the following is not one of the factors that make up the control environment?

Accepted Answer

A)  accounting personnel 
B)  board of directors and audit committee 
C)  organizational structure 
D)  human resource policies and practices 
E)  assignment of authority and responsibility 
A)  accounting personnel 
B)  board of directors and audit committee 
C)  organizational structure 
D)  human resource policies and practices 
E)  assignment of authority and responsibility

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

The IT Manager's primary responsibilities include maintaining custody of systems documentation, programs and files.

Under the Foreign Corrupt Practices Act, management and directors are both subject to fines, penalties, and/or imprisonment.

When planning an audit of internal controls over financial reporting, the auditor needs a comprehensive knowledge of the company and its environment. This knowledge might include:

Which of the following is not one of the characteristics of management's philosophy and operating style?

The COSO report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is:

Incompatible duties are those that allow an irregularity to be perpetrated:

The auditor's primary interest in the control environment is on the:

Which of the following is not considered an access control?

An effective accounting system should measure the value of transactions in a manner that permits recording their proper monetary value in the financial statements, which relates to the:

Security measures include limiting access to storage areas to authorized personnel.

The auditor would expect a lesser degree of segregation of duties in a small company than in a large company.

Which of the following management responsibilities is not established under PCAOB standards?

Why is a preliminary audit strategy important to the auditor?

In order to emphasize the importance of integrity and ethical values among all personnel or an organization, the CEO and other top managers should do all of the following except:

Distinguish between the transaction trail and a transaction walk-through review.

For planning purposes, obtaining an understanding of internal controls involves performing procedures to understand the design of policies and procedures and:

Which of the following systems programs perform common data processing tasks?

Which of the following is not one of the factors that make up the control environment?

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

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

The IT Manager's primary responsibilities include maintaining custody of systems documentation, programs and files.

Under the Foreign Corrupt Practices Act, management and directors are both subject to fines, penalties, and/or imprisonment.

When planning an audit of internal controls over financial reporting, the auditor needs a comprehensive knowledge of the company and its environment. This knowledge might include:

Which of the following is not one of the characteristics of management's philosophy and operating style?

The COSO report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is:

Incompatible duties are those that allow an irregularity to be perpetrated:

The auditor's primary interest in the control environment is on the:

Which of the following is not considered an access control?

An effective accounting system should measure the value of transactions in a manner that permits recording their proper monetary value in the financial statements, which relates to the:

Security measures include limiting access to storage areas to authorized personnel.

The auditor would expect a lesser degree of segregation of duties in a small company than in a large company.

Which of the following management responsibilities is not established under PCAOB standards?

Why is a preliminary audit strategy important to the auditor?

In order to emphasize the importance of integrity and ethical values among all personnel or an organization, the CEO and other top managers should do all of the following except:

Distinguish between the transaction trail and a transaction walk-through review.

For planning purposes, obtaining an understanding of internal controls involves performing procedures to understand the design of policies and procedures and:

Which of the following systems programs perform common data processing tasks?

Which of the following is not one of the factors that make up the control environment?

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