Exam 10: Internal Control, Control Risk, and Section 404 Audits

If, when obtaining an understanding of control activities of a relatively small client, the auditor identified no control activities, the auditor would probably reassess whether the client is auditable.

(True/False)

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Question 61

Significant deficiencies and material weaknesses in internal control of a public company must be reported in writing to which of the following?

(Multiple Choice)

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Question 62

Describe each of the three broad objectives management typically has for internal control.With which of these objectives is the auditor primarily concerned?

(Essay)

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Question 63

Control activities are a subcomponent of the information and communication component of internal control.

(True/False)

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Question 64

When auditing a private company, the auditor should obtain an understanding of internal control sufficient to:

(Multiple Choice)

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Question 65

Which of the following represents a correct statement regarding internal control testing?

(Multiple Choice)

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Question 66

An auditor is likely to use four types of procedures to support the operating effectiveness of internal controls.Which of the following would generally not be used?

(Multiple Choice)

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Question 67

Management's identification and analysis of risk is an ongoing process and is a critical component of effective internal control.An important first step is for management to identify factors that may increase risk.Identify at least five factors, observable by management, which may lead to increased risk in a typical business organization.

(Essay)

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Question 68

In an audit of a non-public company, the less control risk there is, the smaller the amount of planned substantive evidence that is required.

(True/False)

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Question 69

Of the following statements about internal controls, which one is least likely to be correct?

(Multiple Choice)

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Question 70

For most uses, flowcharts are superior to narratives as a method of communicating the characteristics of internal control.

(True/False)

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Question 71

Proper segregation of functional responsibilities calls for separation of:

(Multiple Choice)

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Question 72

Match seven of the terms (a-i)with the definitions provided below (1-7):

Management's identification and analysis of risks relevant to the preparation of financial statements in accordance with an applicable accounting framework.

Independent checks on performance

Segregation of the following activities in an organization: custody of assets, accounting, authorization, and operational responsibility.

Control environment

A process designed to provide reasonable assurance regarding the achievement of management's objectives in the following categories: (1)reliability of financial reporting, (2)effectiveness and efficiency of operations, and (3)compliance with applicable laws and regulations.

Specific authorization

Correct Answer:

Verified

Management's identification and analysis of risks relevant to the preparation of financial statements in accordance with an applicable accounting framework.

Segregation of the following activities in an organization: custody of assets, accounting, authorization, and operational responsibility.

A process designed to provide reasonable assurance regarding the achievement of management's objectives in the following categories: (1)reliability of financial reporting, (2)effectiveness and efficiency of operations, and (3)compliance with applicable laws and regulations.

Company-wide policies for the approval of all transactions within stated limits.

Policies and procedures that help ensure that necessary actions are taken to address risks in the achievement of the entity's objectives.

Management's ongoing and periodic assessment of the quality of internal control performance to determine that controls are operating as intended and are modified when needed.

The actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about internal control and its importance to the entity.

(Matching)

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Question 73

The auditor of a private company is not required by auditing standards to issue a written report on significant deficiencies in internal control.

(True/False)

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Question 74

When assessing whether the financial statements are auditable, the auditor must consider:

(Multiple Choice)

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Question 75

The primary emphasis by auditors is on controls over:

(Multiple Choice)

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Question 76

Management has a legal and professional responsibility to be sure that the financial statements are prepared in accordance with reporting requirements of applicable accounting frameworks.

(True/False)

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Question 77

When management is evaluating the design of internal control, management evaluates whether the control can do which of the following?

(Multiple Choice)

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Question 78

When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be:

(Multiple Choice)

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Question 79

Audit evidence regarding the separation of duties is normally best obtained by:

(Multiple Choice)

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Question 80

Exam 10: Internal Control, Control Risk, and Section 404 Audits

If, when obtaining an understanding of control activities of a relatively small client, the auditor identified no control activities, the auditor would probably reassess whether the client is auditable.

Significant deficiencies and material weaknesses in internal control of a public company must be reported in writing to which of the following?

Describe each of the three broad objectives management typically has for internal control.With which of these objectives is the auditor primarily concerned?

Control activities are a subcomponent of the information and communication component of internal control.

When auditing a private company, the auditor should obtain an understanding of internal control sufficient to:

Which of the following represents a correct statement regarding internal control testing?

An auditor is likely to use four types of procedures to support the operating effectiveness of internal controls.Which of the following would generally not be used?

In an audit of a non-public company, the less control risk there is, the smaller the amount of planned substantive evidence that is required.

Of the following statements about internal controls, which one is least likely to be correct?

For most uses, flowcharts are superior to narratives as a method of communicating the characteristics of internal control.

Proper segregation of functional responsibilities calls for separation of:

The auditor of a private company is not required by auditing standards to issue a written report on significant deficiencies in internal control.

When assessing whether the financial statements are auditable, the auditor must consider:

The primary emphasis by auditors is on controls over:

Management has a legal and professional responsibility to be sure that the financial statements are prepared in accordance with reporting requirements of applicable accounting frameworks.

When management is evaluating the design of internal control, management evaluates whether the control can do which of the following?

When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be:

Audit evidence regarding the separation of duties is normally best obtained by:

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

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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