Question 1

The concept of reasonable assurance suggests that

Accepted Answer

A)  the cost of an internal control should be less than the benefit it provides 
B)  a well-designed system of internal controls will detect all fraudulent activity 
C)  the objectives achieved by an internal control system vary depending on the data processing method 
D)  the effectiveness of internal controls is a function of the industry environment 
A)  the cost of an internal control should be less than the benefit it provides 
B)  a well-designed system of internal controls will detect all fraudulent activity 
C)  the objectives achieved by an internal control system vary depending on the data processing method 
D)  the effectiveness of internal controls is a function of the industry environment A

Question 2

The office manager forgot to record in the accounting records the daily bank deposit.Which control procedure would most likely prevent or detect this error?

Accepted Answer

A)  segregation of duties 
B)  independent verification 
C)  accounting records 
D)  supervision 
A)  segregation of duties 
B)  independent verification 
C)  accounting records 
D)  supervision B

Question 3

Does a qualified opinion on management's assessment of internal controls over the financial reporting system necessitate a qualified opinion on the financial statements? Explain.

Accepted Answer

No.Auditors are permitted to simultaneously render a qualified opinion on management's assessment of internal controls and an unqualified opinion on the financial statements.In other words,it is technically possible for auditors to find internal controls over financial reporting to be weak,but conclude through substantive tests that the weaknesses did not cause the financial statements to be materially misrepresented.

Question 4

Which statement is not correct?

Accepted Answer

A)  Auditors gather evidence using tests of controls and substantive tests. 
B)  The most important element in determining the level of materiality is the mathematical formula. 
C)  Auditors express an opinion in their audit report. 
D)  Auditors compare evidence to established criteria. 
A)  Auditors gather evidence using tests of controls and substantive tests. 
B)  The most important element in determining the level of materiality is the mathematical formula. 
C)  Auditors express an opinion in their audit report. 
D)  Auditors compare evidence to established criteria.

Question 5

The financial statements of an organization reflect a set of management assertions about the financial health of the business.All of the following describe types of assertions except

Accepted Answer

A)  that all of the assets and equities on the balance sheet exist 
B)  that all employees are properly trained to carry out their assigned duties 
C)  that all transactions on the income statement actually occurred 
D)  that all allocated amounts such as depreciation are calculated on a systematic and rational basis 
A)  that all of the assets and equities on the balance sheet exist 
B)  that all employees are properly trained to carry out their assigned duties 
C)  that all transactions on the income statement actually occurred 
D)  that all allocated amounts such as depreciation are calculated on a systematic and rational basis

Question 6

According to COSO,an effective accounting system performs all of the following except

Accepted Answer

A)  identifies and records all valid financial transactions 
B)  records financial transactions in the appropriate accounting period 
C)  separates the duties of data entry and report generation 
D)  records all financial transactions promptly 
A)  identifies and records all valid financial transactions 
B)  records financial transactions in the appropriate accounting period 
C)  separates the duties of data entry and report generation 
D)  records all financial transactions promptly

Question 7

All of the following are components of audit risk except

Accepted Answer

A)  control risk 
B)  legal risk 
C)  detection risk 
D)  inherent risk. 
A)  control risk 
B)  legal risk 
C)  detection risk 
D)  inherent risk.

Question 8

Prior to SOX,external auditors were required to be familiar with the client organization's internal controls,but not test them.Explain.

Accepted Answer

Auditors had the option of not relying o

Question 9

When planning the audit,information is gathered by all of the following methods except

Accepted Answer

A)  completing questionnaires 
B)  interviewing management 
C)  observing activities 
D)  confirming accounts receivable 
A)  completing questionnaires 
B)  interviewing management 
C)  observing activities 
D)  confirming accounts receivable

Question 10

What are the components of audit risk?

Accepted Answer

Inherent risk is associated with the uni

Question 11

Use the internal control procedures listed below to complete statements 6 through 12.
  
-A clerk reorders 250 items when the inventory falls below 25 items.This is an example of __________________________.

Accepted Answer

general au

Question 12

Distinguish between errors and irregularities.Which do you think concern the auditors the most?

Accepted Answer

Errors are unintentional mistakes; while

Question 13

The external auditor is responsible for establishing and maintaining the internal control system.

Accepted Answer

A) True 
 B)False

Question 14

A physical inventory count is an example of a

Accepted Answer

A)  preventive control 
B)  detective control 
C)  corrective control 
D)  Feed-forward control 
A)  preventive control 
B)  detective control 
C)  corrective control 
D)  Feed-forward control

Question 15

Distinguish between inherent risk and control risk.How do internal controls and detection risk fit in?

Accepted Answer

Inherent risk is associated with the uni

Question 16

Use the internal control procedures listed below to complete statements 6 through 12.
  
-The internal audit department recalculates payroll for several employees each pay period.This is an example of __________________________.

Accepted Answer

independen

Question 17

Management can expect various benefits to follow from implementing a system of strong internal control.Which of the following benefits is least likely to occur?

Accepted Answer

A)  reduced cost of an external audit. 
B)  prevents employee collusion to commit fraud. 
C)  availability of reliable data for decision-making purposes. 
D)  some assurance of compliance with the Foreign Corrupt Practices Act of 1977. 
E)  some assurance that important documents and records are protected. 
A)  reduced cost of an external audit. 
B)  prevents employee collusion to commit fraud. 
C)  availability of reliable data for decision-making purposes. 
D)  some assurance of compliance with the Foreign Corrupt Practices Act of 1977. 
E)  some assurance that important documents and records are protected.

Question 18

List the four broad objectives of the internal control system.

Accepted Answer

safeguard assets,
ensure the a

Question 19

Inherent risk

Accepted Answer

A)  exists because all control structures are flawed in some ways. 
B)  is the likelihood that material misstatements exist in the financial statements of the firm. 
C)  is associated with the unique characteristics of the business or industry of the client. 
D)  is the likelihood that the auditor will not find material misstatements. 
A)  exists because all control structures are flawed in some ways. 
B)  is the likelihood that material misstatements exist in the financial statements of the firm. 
C)  is associated with the unique characteristics of the business or industry of the client. 
D)  is the likelihood that the auditor will not find material misstatements.

Question 20

What are the key points of the "Issuer and Management Disclosure" of the Sarbanes-Oxley Act?

Accepted Answer

1.Public companies must report all off b

The concept of reasonable assurance suggests that

The office manager forgot to record in the accounting records the daily bank deposit.Which control procedure would most likely prevent or detect this error?

Does a qualified opinion on management's assessment of internal controls over the financial reporting system necessitate a qualified opinion on the financial statements? Explain.

Which statement is not correct?

The financial statements of an organization reflect a set of management assertions about the financial health of the business.All of the following describe types of assertions except

According to COSO,an effective accounting system performs all of the following except

All of the following are components of audit risk except

Prior to SOX,external auditors were required to be familiar with the client organization's internal controls,but not test them.Explain.

When planning the audit,information is gathered by all of the following methods except

What are the components of audit risk?

Use the internal control procedures listed below to complete statements 6 through 12. -A clerk reorders 250 items when the inventory falls below 25 items.This is an example of __________________________.

Distinguish between errors and irregularities.Which do you think concern the auditors the most?

The external auditor is responsible for establishing and maintaining the internal control system.

A physical inventory count is an example of a

Distinguish between inherent risk and control risk.How do internal controls and detection risk fit in?

Use the internal control procedures listed below to complete statements 6 through 12. -The internal audit department recalculates payroll for several employees each pay period.This is an example of __________________________.

Management can expect various benefits to follow from implementing a system of strong internal control.Which of the following benefits is least likely to occur?

List the four broad objectives of the internal control system.

Inherent risk

What are the key points of the "Issuer and Management Disclosure" of the Sarbanes-Oxley Act?

Auditing IT Governance Controls

Security Part I: Auditing Operating Systems and Networks

IT Security Part II: Auditing Database Systems

Systems Development and Program Change Activities

Overview of Transaction Processing and Financial Reporting Systems

Computer-Assisted Audit Tools and Techniques

Data Structures and CAATTs for Data Extraction

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Business Ethics, Fraud, and Fraud Detection

Enterprise Resource Planning Systems

Filters

Exam 1: Auditing and Internal Control

The concept of reasonable assurance suggests that

The office manager forgot to record in the accounting records the daily bank deposit.Which control procedure would most likely prevent or detect this error?

Does a qualified opinion on management's assessment of internal controls over the financial reporting system necessitate a qualified opinion on the financial statements? Explain.

Which statement is not correct?

The financial statements of an organization reflect a set of management assertions about the financial health of the business.All of the following describe types of assertions except

According to COSO,an effective accounting system performs all of the following except

All of the following are components of audit risk except

Prior to SOX,external auditors were required to be familiar with the client organization's internal controls,but not test them.Explain.

When planning the audit,information is gathered by all of the following methods except

What are the components of audit risk?

Use the internal control procedures listed below to complete statements 6 through 12. -A clerk reorders 250 items when the inventory falls below 25 items.This is an example of __________________________.

Distinguish between errors and irregularities.Which do you think concern the auditors the most?

The external auditor is responsible for establishing and maintaining the internal control system.

A physical inventory count is an example of a

Distinguish between inherent risk and control risk.How do internal controls and detection risk fit in?

Use the internal control procedures listed below to complete statements 6 through 12. -The internal audit department recalculates payroll for several employees each pay period.This is an example of __________________________.

Management can expect various benefits to follow from implementing a system of strong internal control.Which of the following benefits is least likely to occur?

List the four broad objectives of the internal control system.

Inherent risk

What are the key points of the "Issuer and Management Disclosure" of the Sarbanes-Oxley Act?

Auditing IT Governance Controls

Security Part I: Auditing Operating Systems and Networks

IT Security Part II: Auditing Database Systems

Systems Development and Program Change Activities

Overview of Transaction Processing and Financial Reporting Systems

Computer-Assisted Audit Tools and Techniques

Data Structures and CAATTs for Data Extraction

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Business Ethics, Fraud, and Fraud Detection

Enterprise Resource Planning Systems

Filters