Question 1

Which of the following is not true?

Accepted Answer

A)  The auditor should not communicate with management until the audit of internal control over financial reporting is finished. 
B)  Written communication between the auditor and management about internal control over financial reporting should include the definitions of control deficiencies, significant deficiencies, and material weaknesses. 
C)  The auditor should not include in the audit report that no significant deficiencies were noted during an audit of internal control over financial reporting. 
D)  If fraud is discovered, the auditor must report it to the appropriate level of management. 
A)  The auditor should not communicate with management until the audit of internal control over financial reporting is finished. 
B)  Written communication between the auditor and management about internal control over financial reporting should include the definitions of control deficiencies, significant deficiencies, and material weaknesses. 
C)  The auditor should not include in the audit report that no significant deficiencies were noted during an audit of internal control over financial reporting. 
D)  If fraud is discovered, the auditor must report it to the appropriate level of management.

Question 2

Examples of entity-level controls include

Accepted Answer

A)  Management's risk assessment process. 
B)  Controls to monitor results of operations. 
C)  The period-end financial reporting process. 
D)  All of the above are examples of entity-level controls. 
A)  Management's risk assessment process. 
B)  Controls to monitor results of operations. 
C)  The period-end financial reporting process. 
D)  All of the above are examples of entity-level controls.

Question 3

Based on PCAOB guidelines,the audit of ICFR and financial statements audit should be conduced as an "integrated audit."

Accepted Answer

A) True 
 B)False

Question 4

Most public companies must follow the guidelines of AS5.

Accepted Answer

A) True 
 B)False

Question 5

The advantages of generalized audit software include all of the following except:

Accepted Answer

A)  It involves auditing while the data are being processed (real-time). 
B)  It is easy to use. 
C)  The time to develop the application is usually short. 
D)  An entire population can be examined in some instances. 
A)  It involves auditing while the data are being processed (real-time). 
B)  It is easy to use. 
C)  The time to develop the application is usually short. 
D)  An entire population can be examined in some instances.

Question 6

An auditor performing an audit of internal control over financial reporting would be required to

Accepted Answer

A)  Rely on the work of internal auditors. 
B)  Test all of the entity's internal controls. 
C)  Form an opinion on the effectiveness of internal control. 
D)  Randomly identify accounts for an audit of internal control. 
A)  Rely on the work of internal auditors. 
B)  Test all of the entity's internal controls. 
C)  Form an opinion on the effectiveness of internal control. 
D)  Randomly identify accounts for an audit of internal control.

Question 7

Trumpeter Corporation is a small publicly traded company that specializes in the restoration and sale of fine musical instruments.The audit committee is made up of a CEO from a technology company,a college accounting professor,and a local marketing executive.All are sufficiently independent from management.Members of the audit committee meet three times a year.Each time they meet,a different member,who chooses the topics to discuss,leads each meeting.The audit committee then sends the minutes of its meetings to the company's CFO.Solely from this information,what are your conclusions about this audit committee's role within the control environment?

Accepted Answer

An effective audit committee sets the ov

Question 8

The PCAOB makes it clear that the CEO and CFO are responsible for the internal control over financial reporting and the preparation of the statements.

Accepted Answer

A) True 
 B)False

Question 9

All companies must follow the guidelines of AS5.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a primary objective of internal control as established by COSO?

Accepted Answer

A)  Efficiency and effectiveness of operations. 
B)  Effective purchasing systems. 
C)  Compliance with laws and regulations. 
D)  Reliable financial reporting. 
A)  Efficiency and effectiveness of operations. 
B)  Effective purchasing systems. 
C)  Compliance with laws and regulations. 
D)  Reliable financial reporting.

Question 11

AAA & Associates recently finished auditing LinktheEarth Corporation's internal control over financial reporting.AAA found a number of material weaknesses in the company's internal control.LinktheEarth's management remediated all of the weaknesses that AAA found.However,the auditors did not have sufficient time to retest the controls.What report should AAA issue with regards to internal control over financial reporting at year-end?

Accepted Answer

A)  Unqualified report. 
B)  Adverse report. 
C)  Qualified report. 
D)  Disclaimer on opinion. 
A)  Unqualified report. 
B)  Adverse report. 
C)  Qualified report. 
D)  Disclaimer on opinion.

Question 12

An "integrated audit"

Accepted Answer

A)  Will, in most cases, lead to a substantive audit strategy. 
B)  Denies the auditor access to information about the client's controls. 
C)  May be performed by two separate audit firms. 
D)  Is comprised of audits of internal control over financial reporting and of financial statements. 
A)  Will, in most cases, lead to a substantive audit strategy. 
B)  Denies the auditor access to information about the client's controls. 
C)  May be performed by two separate audit firms. 
D)  Is comprised of audits of internal control over financial reporting and of financial statements.

Question 13

Public reporting on the effectiveness of internal control over financial reporting,as required by the Sarbanes-Oxley Act,includes

Accepted Answer

A)  A statement that the public accounting firm that audited the financial statements has provided input on the design of internal controls. 
B)  A statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting. 
C)  An explicit statement as to whether management agrees with the public accounting firm's assessment of internal controls. 
D)  A detailed statement describing changes or additions to the internal control environment that occurred in the current year. 
A)  A statement that the public accounting firm that audited the financial statements has provided input on the design of internal controls. 
B)  A statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting. 
C)  An explicit statement as to whether management agrees with the public accounting firm's assessment of internal controls. 
D)  A detailed statement describing changes or additions to the internal control environment that occurred in the current year.

Question 14

Which of the following is not an element of management's assessment process for the effectiveness of internal control?

Accepted Answer

A)  Evaluate the likelihood that failure of a control could result in a misstatement. 
B)  Determining the locations and business units to include in the evaluation. 
C)  Determining significant deficiencies and material weaknesses in controls. 
D)  Obtaining the auditor's assessment of the internal control effectiveness. 
A)  Evaluate the likelihood that failure of a control could result in a misstatement. 
B)  Determining the locations and business units to include in the evaluation. 
C)  Determining significant deficiencies and material weaknesses in controls. 
D)  Obtaining the auditor's assessment of the internal control effectiveness.

Question 15

A deficiency that implies that there is a reasonable possibility of misstatement in the financial statements that is significant but not material is

Accepted Answer

A)  A material weakness. 
B)  A significant deficiency. 
C)  An insignificant deficiency. 
D)  A probable deficiency. 
A)  A material weakness. 
B)  A significant deficiency. 
C)  An insignificant deficiency. 
D)  A probable deficiency.

Question 16

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date?

Accepted Answer

A)  Withdrawals from Federal Bank of more than $5 million must include a manager's signature. 
B)  At the end of each day at Federal Bank, the total cash in the vault is reconciled with daily registers of deposits and withdrawals. 
C)  Federal Bank has just started establishing trusts for its customers and it has only set up ten. Before making an investment for a trust, bank employees must verify that the investment is in accordance with stated investment policies. 
D)  On an annual basis, Federal Bank management performs credit checks on its loan customers before determining the value of loans it will not be able to collect on. 
A)  Withdrawals from Federal Bank of more than $5 million must include a manager's signature. 
B)  At the end of each day at Federal Bank, the total cash in the vault is reconciled with daily registers of deposits and withdrawals. 
C)  Federal Bank has just started establishing trusts for its customers and it has only set up ten. Before making an investment for a trust, bank employees must verify that the investment is in accordance with stated investment policies. 
D)  On an annual basis, Federal Bank management performs credit checks on its loan customers before determining the value of loans it will not be able to collect on.

Question 17

CBA Associates is auditing a large publicly traded company.The audit of internal controls over financial reporting has been properly planned and the auditors have already identified controls to test using a top-down,risk-based approach.What is the next step?
 Give three examples of procedures that may be completed in the next step in the audit.

Accepted Answer

The next step is testing the design and

Question 18

The PCAOB's definition of internal control over financial reporting specifically mentions all of the following control activities except:

Accepted Answer

A)  The maintenance of asset records. 
B)  The segregation of duties. 
C)  The authorization by management of receipts and expenditures. 
D)  The safeguarding of assets. 
A)  The maintenance of asset records. 
B)  The segregation of duties. 
C)  The authorization by management of receipts and expenditures. 
D)  The safeguarding of assets.

Question 19

An auditor will use the IT test data method in order to gain certain assurances with respect to the

Accepted Answer

A)  Input data. 
B)  Machine capacity. 
C)  Procedures contained within the program. 
D)  Degree of keypunching accuracy. 
A)  Input data. 
B)  Machine capacity. 
C)  Procedures contained within the program. 
D)  Degree of keypunching accuracy.

Question 20

Which of the following audit procedures would an auditor be least likely to perform using a generalized computer audit program?

Accepted Answer

A)  Searching records of accounts receivable balances for credit balances. 
B)  Investigating inventory balances for possible damaged goods. 
C)  Selecting accounts receivable for positive and negative confirmation. 
D)  Listing of unusually large inventory balances. 
A)  Searching records of accounts receivable balances for credit balances. 
B)  Investigating inventory balances for possible damaged goods. 
C)  Selecting accounts receivable for positive and negative confirmation. 
D)  Listing of unusually large inventory balances.

Which of the following is not true?

Examples of entity-level controls include

Based on PCAOB guidelines,the audit of ICFR and financial statements audit should be conduced as an "integrated audit."

Most public companies must follow the guidelines of AS5.

The advantages of generalized audit software include all of the following except:

An auditor performing an audit of internal control over financial reporting would be required to

The PCAOB makes it clear that the CEO and CFO are responsible for the internal control over financial reporting and the preparation of the statements.

All companies must follow the guidelines of AS5.

Which of the following is not a primary objective of internal control as established by COSO?

An "integrated audit"

Public reporting on the effectiveness of internal control over financial reporting,as required by the Sarbanes-Oxley Act,includes

Which of the following is not an element of management's assessment process for the effectiveness of internal control?

A deficiency that implies that there is a reasonable possibility of misstatement in the financial statements that is significant but not material is

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date?

The PCAOB's definition of internal control over financial reporting specifically mentions all of the following control activities except:

An auditor will use the IT test data method in order to gain certain assurances with respect to the

Which of the following audit procedures would an auditor be least likely to perform using a generalized computer audit program?

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

Filters

Exam 7: Auditing Internal Control Over Financial Reporting

Which of the following is not true?

Examples of entity-level controls include

Based on PCAOB guidelines,the audit of ICFR and financial statements audit should be conduced as an "integrated audit."

Most public companies must follow the guidelines of AS5.

The advantages of generalized audit software include all of the following except:

An auditor performing an audit of internal control over financial reporting would be required to

The PCAOB makes it clear that the CEO and CFO are responsible for the internal control over financial reporting and the preparation of the statements.

All companies must follow the guidelines of AS5.

Which of the following is not a primary objective of internal control as established by COSO?

An "integrated audit"

Public reporting on the effectiveness of internal control over financial reporting,as required by the Sarbanes-Oxley Act,includes

Which of the following is not an element of management's assessment process for the effectiveness of internal control?

A deficiency that implies that there is a reasonable possibility of misstatement in the financial statements that is significant but not material is

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date?

The PCAOB's definition of internal control over financial reporting specifically mentions all of the following control activities except:

An auditor will use the IT test data method in order to gain certain assurances with respect to the

Which of the following audit procedures would an auditor be least likely to perform using a generalized computer audit program?

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

Filters