Question 1

A computer program that will not allow a sale to be processed if a customer has exceeded its credit limit is an example of a:

Accepted Answer

A)  preventive control. 
B)  test of controls. 
C)  detect control. 
D)  substantive procedure. 
A)  preventive control. 
B)  test of controls. 
C)  detect control. 
D)  substantive procedure.

Question 2

If the tests of controls confirm the auditor's preliminary evaluation of controls, the planned substantive audit procedures are:

Accepted Answer

A)  increased. 
B)  not modified. 
C)  reduced. 
D)  changed. 
A)  increased. 
B)  not modified. 
C)  reduced. 
D)  changed.

Question 3

Enquiry involves the auditor observing the actual control being performed.

Accepted Answer

A) True 
 B)False

Question 4

If inherent risk is high and no assurance has been obtained from controls testing:

Accepted Answer

A)  only overall analytical review procedures need to be performed to reduce detection risk to an acceptable level. 
B)  no further substantive testing needs to be performed. 
C)  extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance. 
D)  none of the above. 
A)  only overall analytical review procedures need to be performed to reduce detection risk to an acceptable level. 
B)  no further substantive testing needs to be performed. 
C)  extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance. 
D)  none of the above.

Question 5

Benchmarking is an audit strategy that can be used to carry forward the benefit of certain application controls testing into future audit periods.

Accepted Answer

A) True 
 B)False

Question 6

When the auditor decides to include controls testing in their audit strategy, they select those controls that:

Accepted Answer

A)  are the easiest to test. 
B)  provide the most efficient and effective audit evidence. 
C)  provide no assurance that the controls operated effectively throughout the period of reliance. 
D)  provide the least efficient and effective audit evidence. 
A)  are the easiest to test. 
B)  provide the most efficient and effective audit evidence. 
C)  provide no assurance that the controls operated effectively throughout the period of reliance. 
D)  provide the least efficient and effective audit evidence.

Question 7

Manual controls:

Accepted Answer

A)  generally rely on the client's IT applications in some way. 
B)  support the ongoing functioning of the programmed aspects of preventive and detective controls. 
C)  can be classified as program change controls or logical access controls. 
D)  do not rely on the client's IT environment for their operation. 
A)  generally rely on the client's IT applications in some way. 
B)  support the ongoing functioning of the programmed aspects of preventive and detective controls. 
C)  can be classified as program change controls or logical access controls. 
D)  do not rely on the client's IT environment for their operation.

Question 8

Tests of account balances can often provide evidence about the continued functioning of controls.

Accepted Answer

A) True 
 B)False

Question 9

Emile Santiago was anxious to start the selection and testing of controls at Dooley Real Estate Group, a company that specializes in unique coastal properties nestled along the Nova Scotia coastline. A charming collection of coastal communities dots the rocks along the Bay of Fundy. Buzz Dooley brings years of talent and experience from being an executive in the marketing, technology and finance world to personally owning, renovating, aggregating and subdividing property. Along with investment analysis and extensive contract negotiation experience, clients are expertly represented in every transaction. Buzz imparts a sense of ease and joy to finding the perfect property for each client, making owning beach and coastal property a dream! Emile had two main "big picture" objectives: to prevent or detect misstatements in the financial statements.
Emile was concerned about the following issues:
1) Revenue recognition was the trickiest as many of the transactions took place over longer than one year time frames. Partial payments and deposits are being made and have to be matched up with proper revenue recognition criteria.
2) The entertainment and promotional expenses were high and he was not sure how they compared to industry standards, although they appeared to be consistent with the Dooley Real Estate Group's profile and the deep pockets of its clientele.
Required:
a) What are detective and preventive controls?
b) Can Emile use these preventive and detective controls to help him resolve the two issues he is concerned about?
c) Which factors will Emile have to consider when determining the "extent" of tests to be performed?
d) When would Emile perform substantive testing of revenue?

Accepted Answer

a) Preventive controls
Preventive contro

Question 10

Explain and provide examples of the various techniques commonly used when testing controls.

Accepted Answer

Enquiry involves the auditor using quest

Question 11

Attribute sampling is a sampling technique used to reach a conclusion about the total dollar amount of misstatement in an account balance.

Accepted Answer

A) True 
 B)False

Question 12

What are the factors considered by auditors in determining whether there is a need for additional detailed tests of controls?

Accepted Answer

In determining whether there is a need f

Question 13

Tests of controls do not include which of the following auditing techniques?

Accepted Answer

A)  re-performance 
B)  confirmation 
C)  enquiry 
D)  observation 
A)  re-performance 
B)  confirmation 
C)  enquiry 
D)  observation

Question 14

Benchmarking is appropriate when:

Accepted Answer

A)  a reliable trail of program changes exists. 
B)  a programmed control can be matched to a defined program within an application. 
C)  the application is stable. 
D)  all of the above. 
A)  a reliable trail of program changes exists. 
B)  a programmed control can be matched to a defined program within an application. 
C)  the application is stable. 
D)  all of the above.

Question 15

Benny Pecarve is planning to visit an airline company to review the collective assessment of the client's control environment, risk assessment process, information system, control activities and monitoring of controls. What does this mandate describe?

Accepted Answer

A)  entity level controls 
B)  transaction-level controls 
C)  both a and b 
D)  none of the above 
A)  entity level controls 
B)  transaction-level controls 
C)  both a and b 
D)  none of the above

Question 16

Rosie Garaga spent the past week designing audit procedures to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements of a major bookstore operation at the assertion level. What types of audit procedures did she employ?

Accepted Answer

A)  entity-level controls 
B)  detective controls 
C)  tests of controls 
D)  preventive controls 
A)  entity-level controls 
B)  detective controls 
C)  tests of controls 
D)  preventive controls

Question 17

IT general controls are driven by the particular software application being used.

Accepted Answer

A) True 
 B)False

Question 18

To improve efficiency, auditors test only those controls that they believe are critical to their opinion.

Accepted Answer

A) True 
 B)False

Question 19

The purpose of preventive controls is to discover fraud or errors that may have occurred during transaction processing and to rectify those errors.

Accepted Answer

A) True 
 B)False

Question 20

Sue Stableford will be reviewing those controls that stop fraud or errors from occurring. This is an example of a review of

Accepted Answer

A)  detective controls. 
B)  preventive controls. 
C)  entity-level controls. 
D)  transaction-level controls. 
A)  detective controls. 
B)  preventive controls. 
C)  entity-level controls. 
D)  transaction-level controls.

A computer program that will not allow a sale to be processed if a customer has exceeded its credit limit is an example of a:

If the tests of controls confirm the auditor's preliminary evaluation of controls, the planned substantive audit procedures are:

Enquiry involves the auditor observing the actual control being performed.

If inherent risk is high and no assurance has been obtained from controls testing:

Benchmarking is an audit strategy that can be used to carry forward the benefit of certain application controls testing into future audit periods.

When the auditor decides to include controls testing in their audit strategy, they select those controls that:

Manual controls:

Tests of account balances can often provide evidence about the continued functioning of controls.

Explain and provide examples of the various techniques commonly used when testing controls.

Attribute sampling is a sampling technique used to reach a conclusion about the total dollar amount of misstatement in an account balance.

What are the factors considered by auditors in determining whether there is a need for additional detailed tests of controls?

Tests of controls do not include which of the following auditing techniques?

Benchmarking is appropriate when:

Benny Pecarve is planning to visit an airline company to review the collective assessment of the client's control environment, risk assessment process, information system, control activities and monitoring of controls. What does this mandate describe?

Rosie Garaga spent the past week designing audit procedures to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements of a major bookstore operation at the assertion level. What types of audit procedures did she employ?

IT general controls are driven by the particular software application being used.

To improve efficiency, auditors test only those controls that they believe are critical to their opinion.

The purpose of preventive controls is to discover fraud or errors that may have occurred during transaction processing and to rectify those errors.

Sue Stableford will be reviewing those controls that stop fraud or errors from occurring. This is an example of a review of

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters

Exam 8: Execution of the Audit Testing of Controls

A computer program that will not allow a sale to be processed if a customer has exceeded its credit limit is an example of a:

If the tests of controls confirm the auditor's preliminary evaluation of controls, the planned substantive audit procedures are:

Enquiry involves the auditor observing the actual control being performed.

If inherent risk is high and no assurance has been obtained from controls testing:

Benchmarking is an audit strategy that can be used to carry forward the benefit of certain application controls testing into future audit periods.

When the auditor decides to include controls testing in their audit strategy, they select those controls that:

Manual controls:

Tests of account balances can often provide evidence about the continued functioning of controls.

Explain and provide examples of the various techniques commonly used when testing controls.

Attribute sampling is a sampling technique used to reach a conclusion about the total dollar amount of misstatement in an account balance.

What are the factors considered by auditors in determining whether there is a need for additional detailed tests of controls?

Tests of controls do not include which of the following auditing techniques?

Benchmarking is appropriate when:

Benny Pecarve is planning to visit an airline company to review the collective assessment of the client's control environment, risk assessment process, information system, control activities and monitoring of controls. What does this mandate describe?

Rosie Garaga spent the past week designing audit procedures to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements of a major bookstore operation at the assertion level. What types of audit procedures did she employ?

IT general controls are driven by the particular software application being used.

To improve efficiency, auditors test only those controls that they believe are critical to their opinion.

The purpose of preventive controls is to discover fraud or errors that may have occurred during transaction processing and to rectify those errors.

Sue Stableford will be reviewing those controls that stop fraud or errors from occurring. This is an example of a review of

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment I

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters