Question 1

Tracing bills of lading to sales invoices provides evidence that

Accepted Answer

A)  shipments to customers were invoiced. 
B)  shipments to customers were recorded as sales. 
C)  recorded sales were shipped. 
D)  invoiced sales were recorded as sales. 
A)  shipments to customers were invoiced. 
B)  shipments to customers were recorded as sales. 
C)  recorded sales were shipped. 
D)  invoiced sales were recorded as sales.

Question 2

What is the difference between an internal control's design effectiveness and its operating effectiveness?

Accepted Answer

Design effectiveness determines whether

Question 3

Which of the following client internal control activities is not usually performed in the treasurer's department?

Accepted Answer

A)  Verifying the accuracy of checks and vouchers 
B)  Controlling the mailing of checks to vendors 
C)  Approving vendors' invoices for payment 
D)  Canceling payment vouchers when paid 
A)  Verifying the accuracy of checks and vouchers 
B)  Controlling the mailing of checks to vendors 
C)  Approving vendors' invoices for payment 
D)  Canceling payment vouchers when paid

Question 4

If auditors assess control risk at the maximum level,they will tend to

Accepted Answer

A)  perform a great deal of additional tests of controls. 
B)  perform a great deal of substantive testing during the audit. 
C)  perform substantive tests at an interim date. 
D)  perform more audit procedures using internal evidence. 
A)  perform a great deal of additional tests of controls. 
B)  perform a great deal of substantive testing during the audit. 
C)  perform substantive tests at an interim date. 
D)  perform more audit procedures using internal evidence.

Question 5

After obtaining an understanding of internal controls and assessing control risk on the audit of a non-public company,an auditor decided to perform tests of controls.The auditor most likely decided that

Accepted Answer

A)  it would be efficient to perform tests of controls that would result in a reduction in planned substantive tests. 
B)  additional evidence to support a further reduction in control risk is not available. 
C)  an increase in the assessed level of control risk is justified for certain financial statement assertions. 
D)  there were many internal control weaknesses that could allow errors to enter the accounting system. 
A)  it would be efficient to perform tests of controls that would result in a reduction in planned substantive tests. 
B)  additional evidence to support a further reduction in control risk is not available. 
C)  an increase in the assessed level of control risk is justified for certain financial statement assertions. 
D)  there were many internal control weaknesses that could allow errors to enter the accounting system.

Question 6

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Accepted Answer

A)  authorized. 
B)  implemented. 
C)  tested. 
D)  monitored. 
A)  authorized. 
B)  implemented. 
C)  tested. 
D)  monitored.

Question 7

When auditing financial statements of a private company,the minimum work an auditor must perform in connection with a company's internal control is best described by which of the following statements.

Accepted Answer

A)  Perform exhaustive tests of accounting controls and evaluate the company's control system effectiveness. 
B)  Determine whether the company's control policies are designed well enough to prevent material misstatements. 
C)  Prepare auditing working papers that document the auditor's understanding of the company's internal control. 
D)  Design procedures to search for significant deficiencies in the actual operation of the company's internal control. 
A)  Perform exhaustive tests of accounting controls and evaluate the company's control system effectiveness. 
B)  Determine whether the company's control policies are designed well enough to prevent material misstatements. 
C)  Prepare auditing working papers that document the auditor's understanding of the company's internal control. 
D)  Design procedures to search for significant deficiencies in the actual operation of the company's internal control.

Question 8

An auditor is concerned about a policy of management override as a limitation of internal control.Which of the following tests would best assess the validity of the auditor's concern?

Accepted Answer

A)  Matching purchase orders to accounts payable 
B)  Verifying that approved spending limits are not exceeded 
C)  Tracing sales orders to the revenue account 
D)  Reviewing minutes of board meeting 
A)  Matching purchase orders to accounts payable 
B)  Verifying that approved spending limits are not exceeded 
C)  Tracing sales orders to the revenue account 
D)  Reviewing minutes of board meeting

Question 9

Which of the following is a definition of control risk?

Accepted Answer

A)  The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls. 
B)  The risk that the auditor will not detect a material misstatement. 
C)  The risk that the auditor's assessment of internal controls will be at less than the maximum level. 
D)  The susceptibility of material misstatement assuming there are no related internal controls, policies, or procedures. 
A)  The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls. 
B)  The risk that the auditor will not detect a material misstatement. 
C)  The risk that the auditor's assessment of internal controls will be at less than the maximum level. 
D)  The susceptibility of material misstatement assuming there are no related internal controls, policies, or procedures.

Tracing bills of lading to sales invoices provides evidence that

What is the difference between an internal control's design effectiveness and its operating effectiveness?

Which of the following client internal control activities is not usually performed in the treasurer's department?

If auditors assess control risk at the maximum level,they will tend to

After obtaining an understanding of internal controls and assessing control risk on the audit of a non-public company,an auditor decided to perform tests of controls.The auditor most likely decided that

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

When auditing financial statements of a private company,the minimum work an auditor must perform in connection with a company's internal control is best described by which of the following statements.

An auditor is concerned about a policy of management override as a limitation of internal control.Which of the following tests would best assess the validity of the auditor's concern?

Which of the following is a definition of control risk?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 5: Risk Assessment: Internal Control Evaluation

Tracing bills of lading to sales invoices provides evidence that

What is the difference between an internal control's design effectiveness and its operating effectiveness?

Which of the following client internal control activities is not usually performed in the treasurer's department?

If auditors assess control risk at the maximum level,they will tend to

After obtaining an understanding of internal controls and assessing control risk on the audit of a non-public company,an auditor decided to perform tests of controls.The auditor most likely decided that

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

When auditing financial statements of a private company,the minimum work an auditor must perform in connection with a company's internal control is best described by which of the following statements.

An auditor is concerned about a policy of management override as a limitation of internal control.Which of the following tests would best assess the validity of the auditor's concern?

Which of the following is a definition of control risk?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters