Question 1

Transactions between a client and its employee trusts are considered related-party transactions.

Accepted Answer

A) True 
 B)False  True

Question 2

An auditor tests a sample of transactions for proper authorization. Assume the auditor performs test of transactions and concludes that the authorization control is operating effectively when in fact it is not, this is termed:

Accepted Answer

A)  sampling error. 
B)  sampling risk. 
C)  detection error. 
D)  All of the above. 
A)  sampling error. 
B)  sampling risk. 
C)  detection error. 
D)  All of the above. A

Question 3

Benchmarking is appropriate when:

Accepted Answer

A)  client ITGC are strong. 
B)  client application controls are operating effectively. 
C)  the application program has not changed. 
D)  All of the above. 
A)  client ITGC are strong. 
B)  client application controls are operating effectively. 
C)  the application program has not changed. 
D)  All of the above. D

Question 4

Use of an ITF allows:

Accepted Answer

A)  test data to be processed alongside actual data. 
B)  a comparison of test data output with real data output. 
C)  for the possible contamination of company data with test data. 
D)  All of the above. 
A)  test data to be processed alongside actual data. 
B)  a comparison of test data output with real data output. 
C)  for the possible contamination of company data with test data. 
D)  All of the above.

Question 5

Requiring that the supervisor pay and request reimbursement from the next level manager whenever the supervisor entertains her subordinates is an example of:

Accepted Answer

A)  management style. 
B)  soft controls. 
C)  operating effectiveness. 
D)  All of the above. 
A)  management style. 
B)  soft controls. 
C)  operating effectiveness. 
D)  All of the above.

Question 6

If serious control deficiencies are detected prior to year-end and management implements changes to its systems to correct the deficiencies, the auditor:

Accepted Answer

A)  must retest the ITGC again to ensure no additional deficiencies exist. 
B)  cannot rely on the ICFR in planning its financial statement audit. 
C)  must test the changes made to the system to determine if the deficiency was resolved. 
D)  All of the above. 
A)  must retest the ITGC again to ensure no additional deficiencies exist. 
B)  cannot rely on the ICFR in planning its financial statement audit. 
C)  must test the changes made to the system to determine if the deficiency was resolved. 
D)  All of the above.

Question 7

"Tone at the top" is an example of a "soft" internal control.

Accepted Answer

A) True 
 B)False

Question 8

An auditor concludes that the internal controls are not operating effectively when in fact they are. This most likely would result in:

Accepted Answer

A)  a qualified opinion on the ICFR. 
B)  additional substantive testing. 
C)  additional scope requirements. 
D)  All of the above. 
A)  a qualified opinion on the ICFR. 
B)  additional substantive testing. 
C)  additional scope requirements. 
D)  All of the above.

Question 9

Which of the following information would be transferred from the current file to the permanent file?

Accepted Answer

A)  Current year financial statement. 
B)  List of new corporate officers. 
C)  Changes to accounting policies. 
D)  Both b and c 
A)  Current year financial statement. 
B)  List of new corporate officers. 
C)  Changes to accounting policies. 
D)  Both b and c

Question 10

Which of the following would be a control deficiency?

Accepted Answer

A)  The person assigned to implement the control does not understand how to do so. 
B)  The control does not allow management to detect or prevent a material misstatement. 
C)  The control does not operate as intended. 
D)  All of the above. 
A)  The person assigned to implement the control does not understand how to do so. 
B)  The control does not allow management to detect or prevent a material misstatement. 
C)  The control does not operate as intended. 
D)  All of the above.

Question 11

Which of the following would be an example of an operating deficiency?

Accepted Answer

A)  The control operates as intended but the person assigned to perform the control lacks sufficient knowledge. 
B)  The control fails to detect material misstatements. 
C)  The control fails to detect material misstatements on a timely basis. 
D)  The control fails to prevent material misstatements on a timely basis. 
A)  The control operates as intended but the person assigned to perform the control lacks sufficient knowledge. 
B)  The control fails to detect material misstatements. 
C)  The control fails to detect material misstatements on a timely basis. 
D)  The control fails to prevent material misstatements on a timely basis.

Question 12

Benford's law assists in the audit of which area(s):

Accepted Answer

A)  leases. 
B)  cash disbursements. 
C)  accruals and reserves. 
D)  All of the above. 
A)  leases. 
B)  cash disbursements. 
C)  accruals and reserves. 
D)  All of the above.

Question 13

An auditor concludes that the internal controls are operating effectively when in fact they are not. This most likely would result in:

Accepted Answer

A)  reduced audit testing. 
B)  increased detection risk. 
C)  increased audit risk. 
D)  All of the above. 
A)  reduced audit testing. 
B)  increased detection risk. 
C)  increased audit risk. 
D)  All of the above.

Question 14

Which of the following transactions is considered a related-party transaction?

Accepted Answer

A)  Borrowing funds from the pension fund maintained by the company. 
B)  Transferring monies to a subsidiary. 
C)  Selling inventory to a parent. 
D)  All of the above. 
A)  Borrowing funds from the pension fund maintained by the company. 
B)  Transferring monies to a subsidiary. 
C)  Selling inventory to a parent. 
D)  All of the above.

Question 15

Tick marks are optional and used to provide a "short cut" notation of work performed.

Accepted Answer

A) True 
 B)False

Question 16

If the auditor expects that internal control is weak, then this implies that:

Accepted Answer

A)  the sample size should increase. 
B)  the tolerable rate of deviation should increase. 
C)  the expected rate of deviation should increase. 
D)  Both a and c 
A)  the sample size should increase. 
B)  the tolerable rate of deviation should increase. 
C)  the expected rate of deviation should increase. 
D)  Both a and c

Question 17

Entity-levels controls are preventative, not detective.

Accepted Answer

A) True 
 B)False

Question 18

Sample size increases as the:

Accepted Answer

A)  risk of assessing control risk too high increases. 
B)  risk of assessing control risk too low decreases. 
C)  tolerable rate of deviation increases. 
D)  All of the above. 
A)  risk of assessing control risk too high increases. 
B)  risk of assessing control risk too low decreases. 
C)  tolerable rate of deviation increases. 
D)  All of the above.

Question 19

The auditor can rely on the ICFR for substantive testing:

Accepted Answer

A)  for certain accounts but not for others. 
B)  for all accounts. 
C)  for none of the accounts. 
D)  All of the above. 
A)  for certain accounts but not for others. 
B)  for all accounts. 
C)  for none of the accounts. 
D)  All of the above.

Question 20

Which of the following is an illegal act that has an indirect effect on the financial statements?

Accepted Answer

A)  Fraud detected in the payment cycle by the auditor. 
B)  Bribing local officials for favorable lease terms. 
C)  Failure to pay required taxes. 
D)  Placing foreign substances in food in an effort to save money. 
A)  Fraud detected in the payment cycle by the auditor. 
B)  Bribing local officials for favorable lease terms. 
C)  Failure to pay required taxes. 
D)  Placing foreign substances in food in an effort to save money.

Transactions between a client and its employee trusts are considered related-party transactions.

An auditor tests a sample of transactions for proper authorization. Assume the auditor performs test of transactions and concludes that the authorization control is operating effectively when in fact it is not, this is termed:

Benchmarking is appropriate when:

Use of an ITF allows:

Requiring that the supervisor pay and request reimbursement from the next level manager whenever the supervisor entertains her subordinates is an example of:

If serious control deficiencies are detected prior to year-end and management implements changes to its systems to correct the deficiencies, the auditor:

"Tone at the top" is an example of a "soft" internal control.

An auditor concludes that the internal controls are not operating effectively when in fact they are. This most likely would result in:

Which of the following information would be transferred from the current file to the permanent file?

Which of the following would be a control deficiency?

Which of the following would be an example of an operating deficiency?

Benford's law assists in the audit of which area(s):

An auditor concludes that the internal controls are operating effectively when in fact they are not. This most likely would result in:

Which of the following transactions is considered a related-party transaction?

Tick marks are optional and used to provide a "short cut" notation of work performed.

If the auditor expects that internal control is weak, then this implies that:

Entity-levels controls are preventative, not detective.

Sample size increases as the:

The auditor can rely on the ICFR for substantive testing:

Which of the following is an illegal act that has an indirect effect on the financial statements?

An Introduction to Auditing

Overview of an Integrated Audit

The Auditors Role in Society

Legal Environment Affecting Audits Pt Iii Executing an Integrated Audit

Client Acceptance and Continuance and Preliminary Engagement Procedures

Audit Planning and Risk Assessment

Internal Control, Understanding the Clients Internal Control Over Financial Reporting and Auditing Design Effectiveness

Substantive Procedures and the Financial Statement Audit

Auditing Revenue Process: Sales, Billing and Collection in the Health-Care Provider and Retailing Industries

Completing the Integrated Audit and Reporting

The Acquisition and Payments Cycle and Related Accounts: Purchases, Cash Disbursements and Other Related Activities in the Automotive Industry

Auditing Human Resources Cycle Process: Personnel and Payroll in Service Industries

Auditing Inventory Processes: Tracking and Costing Products in the Land Development and Home Building Industry

Assets, Liabilities and Equity Related to the Financing Cycle

Topics Beyond the Integrated Audit

Filters

Exam 8: Planning and Testing Operating Effectiveness of Internal Control Over Financial Reporting

Transactions between a client and its employee trusts are considered related-party transactions.

An auditor tests a sample of transactions for proper authorization. Assume the auditor performs test of transactions and concludes that the authorization control is operating effectively when in fact it is not, this is termed:

Benchmarking is appropriate when:

Use of an ITF allows:

Requiring that the supervisor pay and request reimbursement from the next level manager whenever the supervisor entertains her subordinates is an example of:

If serious control deficiencies are detected prior to year-end and management implements changes to its systems to correct the deficiencies, the auditor:

"Tone at the top" is an example of a "soft" internal control.

An auditor concludes that the internal controls are not operating effectively when in fact they are. This most likely would result in:

Which of the following information would be transferred from the current file to the permanent file?

Which of the following would be a control deficiency?

Which of the following would be an example of an operating deficiency?

Benford's law assists in the audit of which area(s):

An auditor concludes that the internal controls are operating effectively when in fact they are not. This most likely would result in:

Which of the following transactions is considered a related-party transaction?

Tick marks are optional and used to provide a "short cut" notation of work performed.

If the auditor expects that internal control is weak, then this implies that:

Entity-levels controls are preventative, not detective.

Sample size increases as the:

The auditor can rely on the ICFR for substantive testing:

Which of the following is an illegal act that has an indirect effect on the financial statements?

An Introduction to Auditing

Overview of an Integrated Audit

The Auditors Role in Society

Legal Environment Affecting Audits Pt Iii Executing an Integrated Audit

Client Acceptance and Continuance and Preliminary Engagement Procedures

Audit Planning and Risk Assessment

Internal Control, Understanding the Clients Internal Control Over Financial Reporting and Auditing Design Effectiveness

Substantive Procedures and the Financial Statement Audit

Auditing Revenue Process: Sales, Billing and Collection in the Health-Care Provider and Retailing Industries

Completing the Integrated Audit and Reporting

The Acquisition and Payments Cycle and Related Accounts: Purchases, Cash Disbursements and Other Related Activities in the Automotive Industry

Auditing Human Resources Cycle Process: Personnel and Payroll in Service Industries

Auditing Inventory Processes: Tracking and Costing Products in the Land Development and Home Building Industry

Assets, Liabilities and Equity Related to the Financing Cycle

Topics Beyond the Integrated Audit

Filters