Question 1

Which of the following audit tests would be regarded as a test of controls?

Accepted Answer

A)  Tests of the specific items making up the balance in a given general ledger account. 
B)  Tests comparing inventory pricing to vendors' invoices. 
C)  Tests of the signatures on canceled checks to the board of directors' authorizations. 
D)  Tests of the additions to property, plant, and equipment by physical inspections. 
A)  Tests of the specific items making up the balance in a given general ledger account. 
B)  Tests comparing inventory pricing to vendors' invoices. 
C)  Tests of the signatures on canceled checks to the board of directors' authorizations. 
D)  Tests of the additions to property, plant, and equipment by physical inspections.

Question 2

It is important for the CPA to consider the competence of the entity's employees because their competence bears directly and importantly upon the

Accepted Answer

A)  Cost/benefit relationship of the system of internal control. 
B)  Achievement of the objectives of the system of internal control. 
C)  Comparison of recorded accountability with assets. 
D)  Timing of the tests to be performed. 
A)  Cost/benefit relationship of the system of internal control. 
B)  Achievement of the objectives of the system of internal control. 
C)  Comparison of recorded accountability with assets. 
D)  Timing of the tests to be performed.

Question 3

The independent auditor should acquire an understanding of the internal audit function as it relates to the assessment of control risk because

Accepted Answer

A)  Internal audit programs, audit documents, and reports can eliminate the need for the independent auditor's staff. 
B)  The procedures performed by the internal audit staff may eliminate the independent auditor's need for an extensive study and evaluation of internal control. 
C)  The work performed by internal audit personnel may be a factor in determining the nature, timing, and extent of the independent auditor's procedures. 
D)  The understanding of the internal audit function is an important substantive procedure to be performed by the independent auditor. 
A)  Internal audit programs, audit documents, and reports can eliminate the need for the independent auditor's staff. 
B)  The procedures performed by the internal audit staff may eliminate the independent auditor's need for an extensive study and evaluation of internal control. 
C)  The work performed by internal audit personnel may be a factor in determining the nature, timing, and extent of the independent auditor's procedures. 
D)  The understanding of the internal audit function is an important substantive procedure to be performed by the independent auditor.

Question 4

Where computer processing is used in significant accounting applications,internal control activities may be defined by classifying control activities into two types: general and

Accepted Answer

A)  Administrative. 
B)  Specific. 
C)  Application. 
D)  Authorization. 
A)  Administrative. 
B)  Specific. 
C)  Application. 
D)  Authorization.

Question 5

For a complex IT system,auditors are least likely to use which of the following when documenting their understanding of internal controls?

Accepted Answer

A)  Narratives. 
B)  Internal control questionnaires. 
C)  Flowcharts. 
D)  Organization charts. 
A)  Narratives. 
B)  Internal control questionnaires. 
C)  Flowcharts. 
D)  Organization charts.

Question 6

After completing the preliminary phase of the review of internal control,the auditor decides not to rely on the system to restrict substantive procedures.Documentation may be limited to the auditor's

Accepted Answer

A)  Understanding of the internal control. 
B)  Reasons for deciding not to extend the review. 
C)  Basis for concluding that errors and fraud will be prevented. 
D)  Completed internal control questionnaire. 
A)  Understanding of the internal control. 
B)  Reasons for deciding not to extend the review. 
C)  Basis for concluding that errors and fraud will be prevented. 
D)  Completed internal control questionnaire.

Question 7

The program flowcharting symbol representing a decision is a

Accepted Answer

A)  Triangle. 
B)  Circle. 
C)  Rectangle. 
D)  Diamond. 
A)  Triangle. 
B)  Circle. 
C)  Rectangle. 
D)  Diamond.

Question 8

The documentation of an auditor's understanding of internal controls

Accepted Answer

A)  Is optional. 
B)  Must be exclusively in narrative, questionnaires, or flowchart form. 
C)  Must include flowcharts. 
D)  Can include any combination of narratives, questionnaires, or flowcharts. 
A)  Is optional. 
B)  Must be exclusively in narrative, questionnaires, or flowchart form. 
C)  Must include flowcharts. 
D)  Can include any combination of narratives, questionnaires, or flowcharts.

Question 9

A substantive strategy is used when control risk has been set at high.

Accepted Answer

A) True 
 B)False

Question 10

Internal controls are not designed to provide reasonable assurance that

Accepted Answer

A)  Transactions are executed in accordance with management's authorization. 
B)  Embezzlement will be eliminated. 
C)  Access to assets is permitted only in accordance with management's authorization. 
D)  Amounts recorded for assets are compared with the actual existing assets at reasonable intervals. 
A)  Transactions are executed in accordance with management's authorization. 
B)  Embezzlement will be eliminated. 
C)  Access to assets is permitted only in accordance with management's authorization. 
D)  Amounts recorded for assets are compared with the actual existing assets at reasonable intervals.

Question 11

A limit test is a

Accepted Answer

A)  Test to ensure that a numerical value does not exceed some predetermined value. 
B)  Check to ensure that the value in a field falls within an allowable range of values. 
C)  Check to ensure that the data in a field have the proper arithmetic sign. 
D)  Check on a field to ensure that it contains either all numeric or alphabetic characters. 
A)  Test to ensure that a numerical value does not exceed some predetermined value. 
B)  Check to ensure that the value in a field falls within an allowable range of values. 
C)  Check to ensure that the data in a field have the proper arithmetic sign. 
D)  Check on a field to ensure that it contains either all numeric or alphabetic characters.

Question 12

A reliance strategy is used when control risk has been set at high.

Accepted Answer

A) True 
 B)False

Question 13

What are some typical types of evidence that may be collected in testing an entity's internal controls?

Accepted Answer

Applicable procedures include inquiry of

Question 14

The basic concept of internal control that recognizes the cost of internal control should not exceed the benefits expected to be derived is known as

Accepted Answer

A)  Reasonable assurance. 
B)  Management responsibility. 
C)  Limited liability. 
D)  Management by exception. 
A)  Reasonable assurance. 
B)  Management responsibility. 
C)  Limited liability. 
D)  Management by exception.

Question 15

What are the differences between document flowcharts,system flowcharts,and program flowcharts?

Accepted Answer

A document flowchart represents the flow

Question 16

What are four potential tools available to the auditor for documenting her understanding of an entity's system of internal control?

Accepted Answer

1.Copies of the entity's procedures manu

Question 17

Internal control has become a very important focus for publicly traded and privately-held companies alike.Internal control is intended to accomplish at least three objectives and consists of five components of internal control.List the three objectives and five components of internal control.
Objectives of internal control include:
1.reliability,timeliness,and transparency of internal and external,nonfinancial and financial reporting,
2.effectiveness and efficiency of operations,including safeguarding of assets,and
3.compliance with applicable laws and regulations.

Accepted Answer

The five components of interna

Question 18

A primary purpose of internal controls is to

Accepted Answer

A)  Form a basis for evaluating employees. 
B)  Monitor production quality. 
C)  Avoid clerical errors. 
D)  Meet objectives of maintaining reliable documents and records and accurate financial reporting. 
A)  Form a basis for evaluating employees. 
B)  Monitor production quality. 
C)  Avoid clerical errors. 
D)  Meet objectives of maintaining reliable documents and records and accurate financial reporting.

Question 19

An entity's IT infrastructure refers to

Accepted Answer

A)  Hardware components. 
B)  Programmers. 
C)  Software. 
D)  Data provided by the system. 
A)  Hardware components. 
B)  Programmers. 
C)  Software. 
D)  Data provided by the system.

Question 20

The auditor's communication of material weaknesses in internal control for a nonpublic company is

Accepted Answer

A)  Required to enable the auditor to state that the examination has been made in accordance with generally accepted auditing standards. 
B)  The principle reason for studying and evaluating the system of internal controls. 
C)  Incidental to the auditor's objective of forming an opinion as to the fair presentation of the financial statements. 
D)  Required to be included as part of the audit opinion. 
A)  Required to enable the auditor to state that the examination has been made in accordance with generally accepted auditing standards. 
B)  The principle reason for studying and evaluating the system of internal controls. 
C)  Incidental to the auditor's objective of forming an opinion as to the fair presentation of the financial statements. 
D)  Required to be included as part of the audit opinion.

Which of the following audit tests would be regarded as a test of controls?

It is important for the CPA to consider the competence of the entity's employees because their competence bears directly and importantly upon the

The independent auditor should acquire an understanding of the internal audit function as it relates to the assessment of control risk because

Where computer processing is used in significant accounting applications,internal control activities may be defined by classifying control activities into two types: general and

For a complex IT system,auditors are least likely to use which of the following when documenting their understanding of internal controls?

After completing the preliminary phase of the review of internal control,the auditor decides not to rely on the system to restrict substantive procedures.Documentation may be limited to the auditor's

The program flowcharting symbol representing a decision is a

The documentation of an auditor's understanding of internal controls

A substantive strategy is used when control risk has been set at high.

Internal controls are not designed to provide reasonable assurance that

A limit test is a

A reliance strategy is used when control risk has been set at high.

What are some typical types of evidence that may be collected in testing an entity's internal controls?

The basic concept of internal control that recognizes the cost of internal control should not exceed the benefits expected to be derived is known as

What are the differences between document flowcharts,system flowcharts,and program flowcharts?

What are four potential tools available to the auditor for documenting her understanding of an entity's system of internal control?

A primary purpose of internal controls is to

An entity's IT infrastructure refers to

The auditor's communication of material weaknesses in internal control for a nonpublic company is

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

Auditing Internal Control Over Financial Reporting

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 6: Internal Control in a Financial Statement Audit

Which of the following audit tests would be regarded as a test of controls?

It is important for the CPA to consider the competence of the entity's employees because their competence bears directly and importantly upon the

The independent auditor should acquire an understanding of the internal audit function as it relates to the assessment of control risk because

Where computer processing is used in significant accounting applications,internal control activities may be defined by classifying control activities into two types: general and

For a complex IT system,auditors are least likely to use which of the following when documenting their understanding of internal controls?

After completing the preliminary phase of the review of internal control,the auditor decides not to rely on the system to restrict substantive procedures.Documentation may be limited to the auditor's

The program flowcharting symbol representing a decision is a

The documentation of an auditor's understanding of internal controls

A substantive strategy is used when control risk has been set at high.

Internal controls are not designed to provide reasonable assurance that

A limit test is a

A reliance strategy is used when control risk has been set at high.

What are some typical types of evidence that may be collected in testing an entity's internal controls?

The basic concept of internal control that recognizes the cost of internal control should not exceed the benefits expected to be derived is known as

What are the differences between document flowcharts,system flowcharts,and program flowcharts?

What are four potential tools available to the auditor for documenting her understanding of an entity's system of internal control?

A primary purpose of internal controls is to

An entity's IT infrastructure refers to

The auditor's communication of material weaknesses in internal control for a nonpublic company is

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

Auditing Internal Control Over Financial Reporting

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