Question 1

Walk-throughs usually involve all of the following audit procedures except:

Accepted Answer

A)  re-performance. 
B)  inquiry. 
C)  observation. 
D)  inspection. 
A)  re-performance. 
B)  inquiry. 
C)  observation. 
D)  inspection. A

Question 2

The internal control environment includes all of the following except:

Accepted Answer

A)  organisational structure. 
B)  management philosophy and operating style. 
C)  human resource policies and procedures. 
D)  tests of control. 
A)  organisational structure. 
B)  management philosophy and operating style. 
C)  human resource policies and procedures. 
D)  tests of control. D

Question 3

When erroneous data are detected by computer program controls, such data may be excluded from processing and printed on an error report. The error report should most probably be reviewed and followed up by the:

Accepted Answer

A)  IT control group. 
B)  system analyst. 
C)  supervisor of computer operations. 
D)  computer programmer. 
A)  IT control group. 
B)  system analyst. 
C)  supervisor of computer operations. 
D)  computer programmer. A

Question 4

Internal control procedures within the IT activity may leave no visible evidence indicating that the procedures were performed.In such instances, the auditor should test these controls by:

Accepted Answer

A)  making corroborative inquiries. 
B)  observing the separation of duties of personnel. 
C)  reviewing transactions submitted for processing and comparing them to related output. 
D)  reviewing the run manual. 
A)  making corroborative inquiries. 
B)  observing the separation of duties of personnel. 
C)  reviewing transactions submitted for processing and comparing them to related output. 
D)  reviewing the run manual.

Question 5

Which of the following is not a medium that can normally be used by an auditor to record information concerning a client's internal control?

Accepted Answer

A)  Narrative memorandum. 
B)  Procedures manual. 
C)  Flowchart. 
D)  Decision table. 
A)  Narrative memorandum. 
B)  Procedures manual. 
C)  Flowchart. 
D)  Decision table.

Question 6

When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:

Accepted Answer

A)  assess the risk of material misstatement and plan the audit. 
B)  provide suggestions for improvement to the client. 
C)  serve as a basis for setting audit risk and materiality. 
D)  comply with the Corporations Act 2001. 
A)  assess the risk of material misstatement and plan the audit. 
B)  provide suggestions for improvement to the client. 
C)  serve as a basis for setting audit risk and materiality. 
D)  comply with the Corporations Act 2001.

Question 7

Which of the following is an example of a check digit?

Accepted Answer

A)  An agreement of the total number of employees to the total number of cheques printed by the computer. 
B)  An algebraically determined number produced by the other digits of the employee number. 
C)  A logic test that ensures all employee numbers have nine digits. 
D)  A limit check that an employee's hours do not exceed 50 hours per work week. 
A)  An agreement of the total number of employees to the total number of cheques printed by the computer. 
B)  An algebraically determined number produced by the other digits of the employee number. 
C)  A logic test that ensures all employee numbers have nine digits. 
D)  A limit check that an employee's hours do not exceed 50 hours per work week.

Question 8

In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance that:

Accepted Answer

A)  controls have not been circumvented by collusion. 
B)  misstatements have been prevented or detected. 
C)  operational efficiency has been achieved in accordance with management plans. 
D)  management cannot override the system. 
A)  controls have not been circumvented by collusion. 
B)  misstatements have been prevented or detected. 
C)  operational efficiency has been achieved in accordance with management plans. 
D)  management cannot override the system.

Question 9

Which of the following situations most likely represents a weakness in IT internal control?

Accepted Answer

A)  The accounts payable clerk prepares data for computer processing and enters the data into the computer. 
B)  The systems analyst reviews output and controls the distribution of output from the IT department. 
C)  The control clerk establishes control over data received by the IT department and reconciles control totals after processing. 
D)  The systems programmer designs the operating and control functions of programs and participates in testing operating systems 
A)  The accounts payable clerk prepares data for computer processing and enters the data into the computer. 
B)  The systems analyst reviews output and controls the distribution of output from the IT department. 
C)  The control clerk establishes control over data received by the IT department and reconciles control totals after processing. 
D)  The systems programmer designs the operating and control functions of programs and participates in testing operating systems

Question 10

If a control total were to be calculated on each of the following data items, which would best be identified as a hash total for a payroll IT application?

Accepted Answer

A)  Net pay. 
B)  Department numbers. 
C)  Hours worked. 
D)  Total debits and total credits. 
A)  Net pay. 
B)  Department numbers. 
C)  Hours worked. 
D)  Total debits and total credits.

Question 11

Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when:

Accepted Answer

A)  external policies established by parties outside the entity affect its accounting practices. 
B)  management is dominated by one individual. 
C)  internal auditors have direct access to the board of directors and the entity's management. 
D)  the audit committee is active in overseeing the entity's financial reporting policies. 
A)  external policies established by parties outside the entity affect its accounting practices. 
B)  management is dominated by one individual. 
C)  internal auditors have direct access to the board of directors and the entity's management. 
D)  the audit committee is active in overseeing the entity's financial reporting policies.

Question 12

The risk assessment component of internal controls refers to:

Accepted Answer

A)  the auditor's assessment of control risk. 
B)  the auditor's assessment of engagement risk. 
C)  the entity's identification and analysis of risks relevant to achievement of its objectives. 
D)  the entity's monitoring of the potential for material misstatements. 
A)  the auditor's assessment of control risk. 
B)  the auditor's assessment of engagement risk. 
C)  the entity's identification and analysis of risks relevant to achievement of its objectives. 
D)  the entity's monitoring of the potential for material misstatements.

Question 13

When considering the internal control for inventory with respect to segregation of duties, an auditor would be least likely to:

Accepted Answer

A)  inspect documents. 
B)  make inquiries. 
C)  observe procedures. 
D)  consider policy and procedure manuals. 
A)  inspect documents. 
B)  make inquiries. 
C)  observe procedures. 
D)  consider policy and procedure manuals.

Question 14

Which of the following statements about internal control is correct?

Accepted Answer

A)  The establishment and maintenance of internal control is an important responsibility of the internal auditor. 
B)  Properly maintained internal control reasonably ensures that collusion among employees cannot occur. 
C)  The cost-benefit relationship is a primary criterion that should be considered in designing internal control. 
D)  Exceptionally strong internal control is enough for the auditor to eliminate substantive tests on a significant account balance. 
A)  The establishment and maintenance of internal control is an important responsibility of the internal auditor. 
B)  Properly maintained internal control reasonably ensures that collusion among employees cannot occur. 
C)  The cost-benefit relationship is a primary criterion that should be considered in designing internal control. 
D)  Exceptionally strong internal control is enough for the auditor to eliminate substantive tests on a significant account balance.

Question 15

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the:

Accepted Answer

A)  factors that raise doubts about the auditability of the financial report. 
B)  operating effectiveness of internal control policies and procedures. 
C)  risk that material misstatements exist in the financial report. 
D)  possibility that the nature and extent of substantive tests may be reduced. 
A)  factors that raise doubts about the auditability of the financial report. 
B)  operating effectiveness of internal control policies and procedures. 
C)  risk that material misstatements exist in the financial report. 
D)  possibility that the nature and extent of substantive tests may be reduced.

Question 16

The conclusion reached as a result of assessing control risk is referred to as the:

Accepted Answer

A)  assurance provided by internal control. 
B)  determined level of acceptable detection risk. 
C)  product of the understanding of internal control. 
D)  assessed level of control risk. 
A)  assurance provided by internal control. 
B)  determined level of acceptable detection risk. 
C)  product of the understanding of internal control. 
D)  assessed level of control risk.

Question 17

Carmela Department Stores Ltd has a fully integrated IT accounting system and is planning to issue credit cards to credit-worthy customers. To strengthen the internal control by making it difficult for one to create a valid customer account number, the company's independent auditor has suggested the inclusion of a check digit that should be placed:

Accepted Answer

A)  at the beginning of a valid account number, only. 
B)  in the middle of a valid account number, only. 
C)  at the end of a valid account number, only. 
D)  consistently in any position. 
A)  at the beginning of a valid account number, only. 
B)  in the middle of a valid account number, only. 
C)  at the end of a valid account number, only. 
D)  consistently in any position.

Question 18

Which of the following input controls is a numeric value computed to provide assurance that the original value has not been altered in construction or transmission?

Accepted Answer

A)  Hash total. 
B)  Parity check. 
C)  Encryption. 
D)  Check digit. 
A)  Hash total. 
B)  Parity check. 
C)  Encryption. 
D)  Check digit.

Question 19

In the weekly computer run to prepare payroll cheques, a cheque was printed for an employee whose employment was terminated the previous week. Which of the following controls, if properly used, would have been most effective in preventing this error or ensuring its prompt detection?

Accepted Answer

A)  A control total for hours worked, prepared from time cards collected by the timekeeping department and compared to the payroll sheets. 
B)  Requiring the accounting department to account for all pre-numbered cheques issued to the IT department for the processing of the payroll. 
C)  The use of check digits on employee numbers. 
D)  The use of a header label on the payroll input sheet. 
A)  A control total for hours worked, prepared from time cards collected by the timekeeping department and compared to the payroll sheets. 
B)  Requiring the accounting department to account for all pre-numbered cheques issued to the IT department for the processing of the payroll. 
C)  The use of check digits on employee numbers. 
D)  The use of a header label on the payroll input sheet.

Question 20

If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll IT application?

Accepted Answer

A)  Hours worked. 
B)  Employee's identification number. 
C)  Number of employees. 
D)  Gross pay. 
A)  Hours worked. 
B)  Employee's identification number. 
C)  Number of employees. 
D)  Gross pay.

Walk-throughs usually involve all of the following audit procedures except:

The internal control environment includes all of the following except:

When erroneous data are detected by computer program controls, such data may be excluded from processing and printed on an error report. The error report should most probably be reviewed and followed up by the:

Internal control procedures within the IT activity may leave no visible evidence indicating that the procedures were performed.In such instances, the auditor should test these controls by:

Which of the following is not a medium that can normally be used by an auditor to record information concerning a client's internal control?

When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:

Which of the following is an example of a check digit?

In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance that:

Which of the following situations most likely represents a weakness in IT internal control?

If a control total were to be calculated on each of the following data items, which would best be identified as a hash total for a payroll IT application?

Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when:

The risk assessment component of internal controls refers to:

When considering the internal control for inventory with respect to segregation of duties, an auditor would be least likely to:

Which of the following statements about internal control is correct?

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the:

The conclusion reached as a result of assessing control risk is referred to as the:

Which of the following input controls is a numeric value computed to provide assurance that the original value has not been altered in construction or transmission?

In the weekly computer run to prepare payroll cheques, a cheque was printed for an employee whose employment was terminated the previous week. Which of the following controls, if properly used, would have been most effective in preventing this error or ensuring its prompt detection?

If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll IT application?

Assurance and Auditing: An Overview

The Structure of the Profession

Ethics, Independence and Corporate Governance

The Legal Liability of Auditors Part Two: Planning and Risk

Overview of Elements of the Financial Report Audit Process

Planning, Understanding the Entity and Evaluating Business Risk

Assessing Specific Business Risk

Tests of Controls

Substantive Tests of Transactions and Balances

Audit Sampling Part Four: Completion and Communication

Completion and Review

The Auditors Reporting Obligations Part Five: Other Assurance Services

Internal Auditing

Auditing and Assurance Services in the Public Sector

Other Assurance Services and Advanced Topics

Filters

Exam 8: Understanding and Assessing Internal Control Part Three: Tests of Control and Tests of Details

Walk-throughs usually involve all of the following audit procedures except:

The internal control environment includes all of the following except:

When erroneous data are detected by computer program controls, such data may be excluded from processing and printed on an error report. The error report should most probably be reviewed and followed up by the:

Internal control procedures within the IT activity may leave no visible evidence indicating that the procedures were performed.In such instances, the auditor should test these controls by:

Which of the following is not a medium that can normally be used by an auditor to record information concerning a client's internal control?

When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:

Which of the following is an example of a check digit?

In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance that:

Which of the following situations most likely represents a weakness in IT internal control?

If a control total were to be calculated on each of the following data items, which would best be identified as a hash total for a payroll IT application?

Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when:

The risk assessment component of internal controls refers to:

When considering the internal control for inventory with respect to segregation of duties, an auditor would be least likely to:

Which of the following statements about internal control is correct?

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the:

The conclusion reached as a result of assessing control risk is referred to as the:

Which of the following input controls is a numeric value computed to provide assurance that the original value has not been altered in construction or transmission?

In the weekly computer run to prepare payroll cheques, a cheque was printed for an employee whose employment was terminated the previous week. Which of the following controls, if properly used, would have been most effective in preventing this error or ensuring its prompt detection?

If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll IT application?

Assurance and Auditing: An Overview

The Structure of the Profession

Ethics, Independence and Corporate Governance

The Legal Liability of Auditors Part Two: Planning and Risk

Overview of Elements of the Financial Report Audit Process

Planning, Understanding the Entity and Evaluating Business Risk

Assessing Specific Business Risk

Tests of Controls

Substantive Tests of Transactions and Balances

Audit Sampling Part Four: Completion and Communication

Completion and Review

The Auditors Reporting Obligations Part Five: Other Assurance Services

Internal Auditing

Auditing and Assurance Services in the Public Sector

Other Assurance Services and Advanced Topics

Filters