Question 1

In a public company,management's report on internal control must be signed by the members of the audit committee.

Accepted Answer

A) True 
 B)False

Question 2

Management documentation should include all of the following except:

Accepted Answer

A)  Documentation regarding the auditor's evaluation of internal controls. 
B)  Documentation regarding management's testing and evaluation of the controls. 
C)  Documentation regarding the safeguarding of assets. 
D)  Documentation on the controls designed in all five components of internal control. 
A)  Documentation regarding the auditor's evaluation of internal controls. 
B)  Documentation regarding management's testing and evaluation of the controls. 
C)  Documentation regarding the safeguarding of assets. 
D)  Documentation on the controls designed in all five components of internal control.

Question 3

In determining the extent to which the auditor may use the work of others in the audit of ICFR,the auditor should do all of the following except:

Accepted Answer

A)  Test some of the work performed by others to evaluate the quality and effectiveness of their work. 
B)  Evaluate the nature of the controls subjected to the work of others. 
C)  Evaluate the competence and objectivity of the individuals who performed the work. 
D)  All of the above are required. 
A)  Test some of the work performed by others to evaluate the quality and effectiveness of their work. 
B)  Evaluate the nature of the controls subjected to the work of others. 
C)  Evaluate the competence and objectivity of the individuals who performed the work. 
D)  All of the above are required.

Question 4

AS5 requires that the auditor appropriately document the processes,procedures,judgments,and results relating to the audit of internal control.Specifically,what must this documentation include?

Accepted Answer

The auditor's documentation must include

Question 5

When testing a computerized accounting system,which of the following is false regarding the test data approach?

Accepted Answer

A)  The test data need to consist of only those valid and invalid conditions in which the auditor is interested. 
B)  Only one transaction of each type needs be tested. 
C)  Test data are processed by the client's computer programs under the auditor's control. 
D)  The test data must consist of all possible valid and invalid conditions. 
A)  The test data need to consist of only those valid and invalid conditions in which the auditor is interested. 
B)  Only one transaction of each type needs be tested. 
C)  Test data are processed by the client's computer programs under the auditor's control. 
D)  The test data must consist of all possible valid and invalid conditions.

Question 6

You are an experienced audit senior.The new staff accountant on your audit team does not understand what a control deficiency is.Give him a definition of "control deficiency." Include examples of two types of control deficiencies.

Accepted Answer

A control deficiency exists when the des

Question 7

In a public company,management must assess and report on internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 8

When auditing a public company,the auditor must form an opinion on the effectiveness of internal control over financial reporting,or issue a disclaimer in the event of a scope limitation.

Accepted Answer

A) True 
 B)False

Question 9

Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:

Accepted Answer

A)  Reasonable assurance on the financial statements, absolute assurance on internal control. 
B)  Reasonable assurance on internal control, absolute assurance on the financial statements. 
C)  Absolute assurance on both the financial statements and internal control. 
D)  Reasonable assurance on both the financial statements and internal control. 
A)  Reasonable assurance on the financial statements, absolute assurance on internal control. 
B)  Reasonable assurance on internal control, absolute assurance on the financial statements. 
C)  Absolute assurance on both the financial statements and internal control. 
D)  Reasonable assurance on both the financial statements and internal control.

Question 10

Which of the following is true regarding management's documentation of internal controls?

Accepted Answer

A)  Some documentation should focus on controls designed to detect fraud. 
B)  Documentation should focus on controls over the interim financial reporting process. 
C)  Documentation must be done on paper. 
D)  Inadequate documentation is usually considered an insignificant deficiency in internal control. 
A)  Some documentation should focus on controls designed to detect fraud. 
B)  Documentation should focus on controls over the interim financial reporting process. 
C)  Documentation must be done on paper. 
D)  Inadequate documentation is usually considered an insignificant deficiency in internal control.

Question 11

When an auditor tests a computerized accounting system,which of the following is true of the test data approach?

Accepted Answer

A)  Test data are processed by the client's computer programs under the auditor's control. 
B)  Test data must consist of all possible valid and invalid conditions. 
C)  Testing a program at year end provides assurance that the client's processing was accurate for the full year. 
D)  Several transactions of each type must be tested. 
A)  Test data are processed by the client's computer programs under the auditor's control. 
B)  Test data must consist of all possible valid and invalid conditions. 
C)  Testing a program at year end provides assurance that the client's processing was accurate for the full year. 
D)  Several transactions of each type must be tested.

Question 12

Which of the following is least likely to represent a material weakness in internal control for Flynt Corporation?

Accepted Answer

A)  Flynt Corporation's computer systems were not working properly for two days; consequently, employees needed to do all reconciliations manually. 
B)  Flynt Corporation's CFO was arrested last year for embezzling money from the company. 
C)  For the current year, the auditor found a material misstatement in Flynt's sales recognition that was undetected by the internal controls. 
D)  Flynt's audit committee is deemed to be ineffective. 
A)  Flynt Corporation's computer systems were not working properly for two days; consequently, employees needed to do all reconciliations manually. 
B)  Flynt Corporation's CFO was arrested last year for embezzling money from the company. 
C)  For the current year, the auditor found a material misstatement in Flynt's sales recognition that was undetected by the internal controls. 
D)  Flynt's audit committee is deemed to be ineffective.

Question 13

To obtain an understanding of significant processes and relevant subprocesses,auditors would be least likely to use which of the following techniques?

Accepted Answer

A)  Reviewing management documentation. 
B)  Inquiry. 
C)  Scanning. 
D)  Transaction walkthroughs. 
A)  Reviewing management documentation. 
B)  Inquiry. 
C)  Scanning. 
D)  Transaction walkthroughs.

Question 14

Which of the following is true of generalized audit software packages?

Accepted Answer

A)  They can be used only in auditing online computer systems. 
B)  They can be used on any computer without modification. 
C)  They each have their own characteristics that the auditor must carefully consider before using in a given audit situation. 
D)  They enable the auditor to perform all manual test procedures less expensively. 
A)  They can be used only in auditing online computer systems. 
B)  They can be used on any computer without modification. 
C)  They each have their own characteristics that the auditor must carefully consider before using in a given audit situation. 
D)  They enable the auditor to perform all manual test procedures less expensively.

Question 15

In order for an external auditor to complete an audit of a public company,the entity's management must comply with all of the following except:

Accepted Answer

A)  Accept responsibility for the effectiveness of the entity's internal control over financial reporting. 
B)  Evaluate the effectiveness of the entity's internal control over financial reporting using suitable control criteria. 
C)  Support its evaluation with sufficient evidence, including documentation. 
D)  Present an oral assessment of the effectiveness of the entity's internal control over financial reporting as of the end of the entity's most recent fiscal year. 
A)  Accept responsibility for the effectiveness of the entity's internal control over financial reporting. 
B)  Evaluate the effectiveness of the entity's internal control over financial reporting using suitable control criteria. 
C)  Support its evaluation with sufficient evidence, including documentation. 
D)  Present an oral assessment of the effectiveness of the entity's internal control over financial reporting as of the end of the entity's most recent fiscal year.

Question 16

Which of the following statements is false?

Accepted Answer

A)  The PCAOB focuses on the financial reporting objective of internal controls. 
B)  Management is required to base internal controls on a recognized control framework. 
C)  Most U.S. companies use the internal control framework developed by COSO in the early 1990s. 
D)  All controls relevant to financial reporting are accounting controls. 
A)  The PCAOB focuses on the financial reporting objective of internal controls. 
B)  Management is required to base internal controls on a recognized control framework. 
C)  Most U.S. companies use the internal control framework developed by COSO in the early 1990s. 
D)  All controls relevant to financial reporting are accounting controls.

Question 17

Which of the following is an advantage of generalized computer audit packages?

Accepted Answer

A)  They are all written in one identical computer language. 
B)  They can be used for audits of clients that use differing IT equipment and file formats. 
C)  They have reduced the need for the auditor to study input controls for IT-related procedures. 
D)  Their use can be substituted for a relatively large part of the required compliance testing. 
A)  They are all written in one identical computer language. 
B)  They can be used for audits of clients that use differing IT equipment and file formats. 
C)  They have reduced the need for the auditor to study input controls for IT-related procedures. 
D)  Their use can be substituted for a relatively large part of the required compliance testing.

Question 18

ACL is an example of

Accepted Answer

A)  An EDI software package. 
B)  An IT software package. 
C)  Software that allows auditors to retrieve and evaluate data from client systems. 
D)  A type of networking. 
A)  An EDI software package. 
B)  An IT software package. 
C)  Software that allows auditors to retrieve and evaluate data from client systems. 
D)  A type of networking.

Question 19

An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means

Accepted Answer

A)  The auditor must consider the integrated thoughts and ideas of everyone on the audit staff. 
B)  The auditor must conduct two audits, one on the effectiveness of internal control and one on the financial statements, in an integrated way. 
C)  The auditor must integrate the same objectives whether auditing internal control or auditing the financial statements. 
D)  Two independent CPA firms must work together on the audit. 
A)  The auditor must consider the integrated thoughts and ideas of everyone on the audit staff. 
B)  The auditor must conduct two audits, one on the effectiveness of internal control and one on the financial statements, in an integrated way. 
C)  The auditor must integrate the same objectives whether auditing internal control or auditing the financial statements. 
D)  Two independent CPA firms must work together on the audit.

Question 20

Identify indicators of a material weakness in internal control over financial reporting.

Accepted Answer

Indicators of a material weakness in ICF

Exam 7: Auditing Internal Control Over Financial Reporting

In a public company,management's report on internal control must be signed by the members of the audit committee.

Management documentation should include all of the following except:

In determining the extent to which the auditor may use the work of others in the audit of ICFR,the auditor should do all of the following except:

AS5 requires that the auditor appropriately document the processes,procedures,judgments,and results relating to the audit of internal control.Specifically,what must this documentation include?

When testing a computerized accounting system,which of the following is false regarding the test data approach?

You are an experienced audit senior.The new staff accountant on your audit team does not understand what a control deficiency is.Give him a definition of "control deficiency." Include examples of two types of control deficiencies.

In a public company,management must assess and report on internal control over financial reporting.

When auditing a public company,the auditor must form an opinion on the effectiveness of internal control over financial reporting,or issue a disclaimer in the event of a scope limitation.

Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:

Which of the following is true regarding management's documentation of internal controls?

When an auditor tests a computerized accounting system,which of the following is true of the test data approach?

Which of the following is least likely to represent a material weakness in internal control for Flynt Corporation?

To obtain an understanding of significant processes and relevant subprocesses,auditors would be least likely to use which of the following techniques?

Which of the following is true of generalized audit software packages?

In order for an external auditor to complete an audit of a public company,the entity's management must comply with all of the following except:

Which of the following statements is false?

Which of the following is an advantage of generalized computer audit packages?

ACL is an example of

An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means

Identify indicators of a material weakness in internal control over financial reporting.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,and Internal Auditing Services

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