Question 1

Which of the following concerning the auditor's report on internal control over financial reporting is correct?

Accepted Answer

A)  The auditor's report contains an opinion on the effectiveness of internal control over financial reporting based on the auditor's independent work. 
B)  In the report on internal control over financial reporting, the auditor can issue only a qualified or an unqualified opinion. 
C)  The auditor needs to state management's assessment of internal control over financial reporting, but does not necessarily need to comment on whether he or she agrees. 
D)  An unqualified opinion is required if a material weakness is identified. 
A)  The auditor's report contains an opinion on the effectiveness of internal control over financial reporting based on the auditor's independent work. 
B)  In the report on internal control over financial reporting, the auditor can issue only a qualified or an unqualified opinion. 
C)  The auditor needs to state management's assessment of internal control over financial reporting, but does not necessarily need to comment on whether he or she agrees. 
D)  An unqualified opinion is required if a material weakness is identified.

Question 2

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 3

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 4

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 entity 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 entity systems. 
D)  A type of networking.

Question 5

Prior to issuing a report on internal controls over financial reporting,an auditor is required to

Accepted Answer

A)  Perform procedures sufficient to identify all control deficiencies. 
B)  Communicate to management, in writing, all control deficiencies previously included in written communication from the internal auditors. 
C)  Communicate to management, in writing, all control deficiencies identified during the audit and inform the audit committee when such a communication has been made. 
D)  Represent that no significant deficiencies were noted during the audit of internal control. 
A)  Perform procedures sufficient to identify all control deficiencies. 
B)  Communicate to management, in writing, all control deficiencies previously included in written communication from the internal auditors. 
C)  Communicate to management, in writing, all control deficiencies identified during the audit and inform the audit committee when such a communication has been made. 
D)  Represent that no significant deficiencies were noted during the audit of internal control.

Question 6

Discuss entity-level controls and provide examples of these types of controls.

Accepted Answer

Entity-level controls can have a pervasi

Question 7

Which of the following is not a topic that requires special consideration by management during management's internal control assessment process and by the auditor during the audit of internal control?

Accepted Answer

A)  Multiple locations and business units. 
B)  Service organizations. 
C)  The role of the auditor in internal control. 
D)  Safeguarding assets. 
A)  Multiple locations and business units. 
B)  Service organizations. 
C)  The role of the auditor in internal control. 
D)  Safeguarding assets.

Question 8

AAA & Associates recently finished auditing LinktheEarth Corporation's internal control over financial reporting.AAA found a number of material weaknesses in the entity'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 9

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 10

Management's written representations concerning internal control are

Accepted Answer

A)  Addressed to the users of the financial statements. 
B)  Normally drafted by management. 
C)  Included in the auditor's final report. 
D)  Signed by the CEO and CFO. 
A)  Addressed to the users of the financial statements. 
B)  Normally drafted by management. 
C)  Included in the auditor's final report. 
D)  Signed by the CEO and CFO.

Question 11

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 the meeting.The audit committee then sends the minutes of its meetings to the entity'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 12

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 13

Most public companies must follow the guidelines of AS5.

Accepted Answer

A) True 
 B)False

Question 14

In the context of an audit of internal controls,the auditor must document all of the following except:

Accepted Answer

A)  The extent to which he or she relied upon work performed by others. 
B)  The auditor's understanding and evaluation of the design of each of the components of the entity's internal control over financial reporting. 
C)  Transcripts of the auditor's discussion with management concerning the points at which misstatements could occur. 
D)  The evaluation of any deficiencies discovered that could result in a modification of the auditor's report. 
A)  The extent to which he or she relied upon work performed by others. 
B)  The auditor's understanding and evaluation of the design of each of the components of the entity's internal control over financial reporting. 
C)  Transcripts of the auditor's discussion with management concerning the points at which misstatements could occur. 
D)  The evaluation of any deficiencies discovered that could result in a modification of the auditor's report.

Question 15

Section 404 of the Sarbanes-Oxley Act includes which of the following?

Accepted Answer

A)  A requirement that management of a publicly traded company issues an assessment of internal control that covers the entire year. 
B)  Specific guidance on what constitutes adequate internal control. 
C)  A requirement that management of a publicly traded company accepts responsibility for establishing and maintaining adequate internal controls. 
D)  A requirement that management of a publicly traded company issues an assessment regarding the efficiency of internal control for the year. 
A)  A requirement that management of a publicly traded company issues an assessment of internal control that covers the entire year. 
B)  Specific guidance on what constitutes adequate internal control. 
C)  A requirement that management of a publicly traded company accepts responsibility for establishing and maintaining adequate internal controls. 
D)  A requirement that management of a publicly traded company issues an assessment regarding the efficiency of internal control for the year.

Question 16

Information Nation has two hundred locations spread across the fifty states.Twenty of the locations are considered to be individually important,but fifty of the locations are not important even when aggregated from the others.Five locations deal with foreign exchange trading.These locations are not considered important,but they are important when aggregated with the other locations.As an auditor,discuss the considerations involved in testing multiple locations and group the locations accordingly (provide how many locations are included in each group).Include the treatment that each group should receive from the auditor.

Accepted Answer

First,the auditor should determine which

Question 17

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 18

The person in charge of authorizing credit to customers does not properly understand what constitutes a credit risk.This is an example of

Accepted Answer

A)  A management deficiency. 
B)  A design deficiency. 
C)  A deficiency in operation. 
D)  This is not an internal control deficiency. 
A)  A management deficiency. 
B)  A design deficiency. 
C)  A deficiency in operation. 
D)  This is not an internal control deficiency.

Question 19

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 entity'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 entity's computer programs under the auditor's control. 
D)  The test data must consist of all possible valid and invalid conditions.

Question 20

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

Accepted Answer

A) True 
 B)False

Which of the following concerning the auditor's report on internal control over financial reporting is correct?

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

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

ACL is an example of

Prior to issuing a report on internal controls over financial reporting,an auditor is required to

Discuss entity-level controls and provide examples of these types of controls.

Which of the following is not a topic that requires special consideration by management during management's internal control assessment process and by the auditor during the audit of internal control?

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.

Management's written representations concerning internal control are

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

Most public companies must follow the guidelines of AS5.

In the context of an audit of internal controls,the auditor must document all of the following except:

Section 404 of the Sarbanes-Oxley Act includes which of the following?

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:

The person in charge of authorizing credit to customers does not properly understand what constitutes a credit risk.This is an example of

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

In a public company,management must assess and report on 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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters

Exam 7: Auditing Internal Control Over Financial Reporting

Which of the following concerning the auditor's report on internal control over financial reporting is correct?

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

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

ACL is an example of

Prior to issuing a report on internal controls over financial reporting,an auditor is required to

Discuss entity-level controls and provide examples of these types of controls.

Which of the following is not a topic that requires special consideration by management during management's internal control assessment process and by the auditor during the audit of internal control?

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.

Management's written representations concerning internal control are

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

Most public companies must follow the guidelines of AS5.

In the context of an audit of internal controls,the auditor must document all of the following except:

Section 404 of the Sarbanes-Oxley Act includes which of the following?

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:

The person in charge of authorizing credit to customers does not properly understand what constitutes a credit risk.This is an example of

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

In a public company,management must assess and report on 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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters