Question 1

When determining what type of report to issue on internal control under Section 404,

Accepted Answer

A) an adverse opinion on internal control must be given if any weaknesses in a key internal control is discovered. 
B) a scope limitation requires the auditor to disclaim an opinion on internal controls. 
C) if the auditor gives a qualified opinion on the financial statements,they must give a qualified opinion on internal controls. 
D) a scope limitation requires the auditor to express a qualified opinion or a disclaimer of opinion on internal controls. 
A) an adverse opinion on internal control must be given if any weaknesses in a key internal control is discovered. 
B) a scope limitation requires the auditor to disclaim an opinion on internal controls. 
C) if the auditor gives a qualified opinion on the financial statements,they must give a qualified opinion on internal controls. 
D) a scope limitation requires the auditor to express a qualified opinion or a disclaimer of opinion on internal controls. D

Question 2

Which type of evidence is not used by the auditor to obtain an understanding of the design and implementation of internal control?

Accepted Answer

A) inquiry 
B) observation 
C) confirmation 
D) inspection 
A) inquiry 
B) observation 
C) confirmation 
D) inspection C

Question 3

Walkthroughs combine observation,inspection,and inquiry to assure that the controls designed by management have been implemented.

Accepted Answer

A) True 
 B)False  True

Question 4

Key controls are not sufficient to achieve the transaction-related audit objectives.

Accepted Answer

A) True 
 B)False

Question 5

In the audit of a private company,the auditor will test internal controls when control risk is initially assessed at

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

Which of the following is not seen as an advantage to using generalized audit software (GAS)?

Accepted Answer

A) Auditors can learn the software in a short period of time. 
B) It can be applied to a variety of clients after detailed customization. 
C) It can be applied to a variety of clients with minimal adjustments to the software. 
D) It greatly accelerates audit testing over manual procedures. 
A) Auditors can learn the software in a short period of time. 
B) It can be applied to a variety of clients after detailed customization. 
C) It can be applied to a variety of clients with minimal adjustments to the software. 
D) It greatly accelerates audit testing over manual procedures.

Question 7

The scope of the auditor's report on internal control is limited to obtaining reasonable assurance that significant weaknesses in internal control are identified.

Accepted Answer

A) True 
 B)False

Question 8

Auditors often use Generalized Audit Software during their testing of a client's internal controls.For the following uses of the software provide a description and an example.
Verify extensions and footings
Print confirmation requests
Compare data on separate files

Accepted Answer

Verify extensions and footings: verify a

Question 9

A ________ exists if one or more control deficiencies exist that are less severe than a material weakness,but are important enough to merit attention by those responsible for oversight of the company's financial reporting.

Accepted Answer

A) potential misstatement 
B) significant weakness 
C) significant deficiency 
D) fraud symptom 
A) potential misstatement 
B) significant weakness 
C) significant deficiency 
D) fraud symptom

Question 10

When a compensating control exists,the absence of a key control

Accepted Answer

A) is no longer a concern because there is no longer a significant deficiency or material weakness. 
B) is still a major concern to the auditor. 
C) could cause a material loss,so it must be tested using substantive procedures. 
D) is magnified and must be removed from the sampling process and examined in its entirety. 
A) is no longer a concern because there is no longer a significant deficiency or material weakness. 
B) is still a major concern to the auditor. 
C) could cause a material loss,so it must be tested using substantive procedures. 
D) is magnified and must be removed from the sampling process and examined in its entirety.

Question 11

Which of the following is most correct for audits of non-public companies?

Accepted Answer

A) An audit of internal control is required. 
B) An audit of internal control is not required. 
C) An audit of the design of internal controls is required. 
D) An audit of the operational effectiveness of internal controls is required. 
A) An audit of internal control is required. 
B) An audit of internal control is not required. 
C) An audit of the design of internal controls is required. 
D) An audit of the operational effectiveness of internal controls is required.

Question 12

How must significant deficiencies and material weaknesses be communicated to those charged with governance?

Accepted Answer

A) Either oral or written communication is acceptable. 
B) Oral communication is required. 
C) Written communication is required. 
D) Written communication is required for material weaknesses,but oral communication is allowed for significant deficiencies. 
A) Either oral or written communication is acceptable. 
B) Oral communication is required. 
C) Written communication is required. 
D) Written communication is required for material weaknesses,but oral communication is allowed for significant deficiencies.

Question 13

Auditors often identify less significant internal control-related issues,as well as opportunities for the client to make operational improvements in the

Accepted Answer

A) adverse opinion. 
B) Section 404 report. 
C) management letter. 
D) Type 1 report. 
A) adverse opinion. 
B) Section 404 report. 
C) management letter. 
D) Type 1 report.

Question 14

When making a preliminary assessment of control risk,the starting point for most auditors is

Accepted Answer

A) IT assessment controls. 
B) assessment of entity level controls. 
C) transaction-related controls. 
D) fraud controls. 
A) IT assessment controls. 
B) assessment of entity level controls. 
C) transaction-related controls. 
D) fraud controls.

Question 15

When dealing with the documentation of internal control,

Accepted Answer

A) in a narrative,most questions simply require a "yes" or "no" response. 
B) questionnaires offer useful checklists to remind the auditor of the many different types of internal controls that should exist. 
C) questionnaires and flowcharts should not be used together. 
D) flowcharts fail to show the segregation of duties in the company. 
A) in a narrative,most questions simply require a "yes" or "no" response. 
B) questionnaires offer useful checklists to remind the auditor of the many different types of internal controls that should exist. 
C) questionnaires and flowcharts should not be used together. 
D) flowcharts fail to show the segregation of duties in the company.

Question 16

The auditor assesses control risk for each related audit objective and supports control risk assessments with tests of controls.

Accepted Answer

A) True 
 B)False

Question 17

The assessment of control risk does not impact the testing of controls.

Accepted Answer

A) True 
 B)False

Question 18

The procedures to obtain an understanding of internal control are only applied when the assessed control risk is high.

Accepted Answer

A) True 
 B)False

Question 19

Which deficiency exists if a necessary control is missing or not properly implemented?

Accepted Answer

A) control 
B) significant 
C) design 
D) operating 
A) control 
B) significant 
C) design 
D) operating

Question 20

To determine if significant internal control deficiencies are material weaknesses,they must be evaluated on their

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Exam 12: Assessing Control Risk and Reporting on Internal Controls

When determining what type of report to issue on internal control under Section 404,

Which type of evidence is not used by the auditor to obtain an understanding of the design and implementation of internal control?

Walkthroughs combine observation,inspection,and inquiry to assure that the controls designed by management have been implemented.

Key controls are not sufficient to achieve the transaction-related audit objectives.

In the audit of a private company,the auditor will test internal controls when control risk is initially assessed at

Which of the following is not seen as an advantage to using generalized audit software (GAS)?

The scope of the auditor's report on internal control is limited to obtaining reasonable assurance that significant weaknesses in internal control are identified.

Auditors often use Generalized Audit Software during their testing of a client's internal controls.For the following uses of the software provide a description and an example. Verify extensions and footings Print confirmation requests Compare data on separate files

A ________ exists if one or more control deficiencies exist that are less severe than a material weakness,but are important enough to merit attention by those responsible for oversight of the company's financial reporting.

When a compensating control exists,the absence of a key control

Which of the following is most correct for audits of non-public companies?

How must significant deficiencies and material weaknesses be communicated to those charged with governance?

Auditors often identify less significant internal control-related issues,as well as opportunities for the client to make operational improvements in the

When making a preliminary assessment of control risk,the starting point for most auditors is

When dealing with the documentation of internal control,

The auditor assesses control risk for each related audit objective and supports control risk assessments with tests of controls.

The assessment of control risk does not impact the testing of controls.

The procedures to obtain an understanding of internal control are only applied when the assessed control risk is high.

Which deficiency exists if a necessary control is missing or not properly implemented?

To determine if significant internal control deficiencies are material weaknesses,they must be evaluated on their

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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