Exam 7: Gaining an Understanding of the Clients System of Internal Controls

Maxime Talbot is concerned that his client's control system has a risk of the wrong price being charged on the purchase invoice by the supplier. At which transaction stage would this Risk be reviewed?

Claudia Andreou was concerned when she reviewed the operations of her client and noticed that many of the employees had incompatible duties over the recording of transactions and Custody of assets. This best refers to which desired control?

The internal control objective of 'valued' refers to controls in place to ensure that transactions are recorded in the correct accounting period.

Internal controls in large and medium sized entities can only provide an entity with reasonable assurance in achieving its financial reporting objectives. Which of the following is Not an inherent limitation of internal control?

Significant professional judgment is never required to decide whether an identified internal control weakness is significant enough to warrant communicating to management.

Explain the key elements of the control environment.

The control environment does not:

Mona Kew is reviewing the purchasing and payments process. At which stage would she determine that purchases that are being made are properly authorized?

Detection risk refers to:

For purchasing inventory transactions, an example of a risk that arises is:

If controls are in place to ensure that transactions are recorded in the correct accounting period, this satisfies which internal control objective?

The most common ways of auditors documenting their understanding of internal controls include:

The purpose of the management letter is to inform:

Which of the following statements is correct?

In understanding the client's control activities at the entity level, consideration is given to factors such as:

For identified risks, management:

Which of the following statements relating to control activities is incorrect?

Checklists and preformatted questionnaires are particularly helpful in industries that the auditor may not personally be familiar with auditing.

When gaining an understanding of the client's monitoring processes at the entity level, factors ordinarily considered include:

The generally accepted objectives of internal control do not include: