Question 1

The internal control objective of ensuring that all sales on credit are recorded in accordance with GAAP is ________.

Accepted Answer

A) accuracy 
B) classification 
C) accounting 
D) proper period 
A) accuracy 
B) classification 
C) accounting 
D) proper period

Question 2

A clean audit is normally associated with weak controls.

Accepted Answer

A) True 
 B)False

Question 3

Key controls are those ________.

Accepted Answer

A) over significant risks 
B) over physical access 
C) on which the auditor intends to rely 
D) designed by the audit committee to prevent management fraud 
A) over significant risks 
B) over physical access 
C) on which the auditor intends to rely 
D) designed by the audit committee to prevent management fraud

Question 4

The auditor's primary purpose for evaluating internal control is to ________.

Accepted Answer

A) help design of the final audit plan 
B) help management design internal control systems 
C) help judge how much control is necessary 
D) help determine much business risk is acceptable 
A) help design of the final audit plan 
B) help management design internal control systems 
C) help judge how much control is necessary 
D) help determine much business risk is acceptable

Question 5

The COSO definition of internal control says that internal control is a process to achieve objectives in which of the following categories?

Accepted Answer

A) Compliance with applicable laws and regulations,usefulness of financial information for making decisions,and the ability of the company to continue in operation. 
B) Usefulness of financial information for making decisions,reliability of financial reporting,and the ability of the company to continue in operation. 
C) Reliability of financial reporting,the usefulness of financial information for making decisions,and compliance with applicable laws and regulations. 
D) Effectiveness and efficiency of operations,reliability of financial reporting,and compliance with applicable laws and regulations. 
A) Compliance with applicable laws and regulations,usefulness of financial information for making decisions,and the ability of the company to continue in operation. 
B) Usefulness of financial information for making decisions,reliability of financial reporting,and the ability of the company to continue in operation. 
C) Reliability of financial reporting,the usefulness of financial information for making decisions,and compliance with applicable laws and regulations. 
D) Effectiveness and efficiency of operations,reliability of financial reporting,and compliance with applicable laws and regulations.

Question 6

Identify three general categories of misstatements and give an example of each.

Accepted Answer

Any three of the following:
i.Invalid tr

Question 7

The primary reason to evaluate internal control is to formulate constructive suggestions for improvement.

Accepted Answer

A) True 
 B)False

Question 8

The Handbook section "Communication with Management of Matters Identified During the Financial Statement Audit" requires that ________.

Accepted Answer

A) all nontrivial misstatements are communicated to management in writing 
B) all nontrivial misstatements and possible illegal acts are communicated to management 
C) all serious control risks uncovered are communicated to management in writing 
D) only frauds and illegal acts are communicated to management 
A) all nontrivial misstatements are communicated to management in writing 
B) all nontrivial misstatements and possible illegal acts are communicated to management 
C) all serious control risks uncovered are communicated to management in writing 
D) only frauds and illegal acts are communicated to management

Question 9

Anyone who designs a processing system should ________.

Accepted Answer

A) not do the documentation 
B) be independent of management 
C) have access to the data so they can make the system more efficient 
D) not do the technical programming work 
A) not do the documentation 
B) be independent of management 
C) have access to the data so they can make the system more efficient 
D) not do the technical programming work

Question 10

What are the most cost-effective types of controls over data?

Accepted Answer

A) Design controls. 
B) Batch controls. 
C) Input controls. 
D) Monitoring controls. 
A) Design controls. 
B) Batch controls. 
C) Input controls. 
D) Monitoring controls.

Question 11

All audit engagements require some minimal reliance on internal controls.

Accepted Answer

A) True 
 B)False

Question 12

What is a "walk through" test?

Accepted Answer

A) A means of ensuring that transactions are processed as described in the control system flowchart. 
B) A test of physical security over access to computer rooms. 
C) A computer-assisted technique for processing client data on a different system. 
D) An audit procedure carried out at the planning stage of an audit. 
A) A means of ensuring that transactions are processed as described in the control system flowchart. 
B) A test of physical security over access to computer rooms. 
C) A computer-assisted technique for processing client data on a different system. 
D) An audit procedure carried out at the planning stage of an audit.

Question 13

Why should an auditor not rely on substantive testing to the exclusion of testing internal controls?

Accepted Answer

A major goal in audits is to be efficien

Question 14

Control tests should be applied to samples of transactions and control procedures ________.

Accepted Answer

A) that occurred during the interim audit so that they provide direct auditor's knowledge 
B) selected by management as being representative of all transactions processed 
C) throughout the period being audited 
D) that occur primarily close to reporting period ends such as year-end or quarter-end 
A) that occurred during the interim audit so that they provide direct auditor's knowledge 
B) selected by management as being representative of all transactions processed 
C) throughout the period being audited 
D) that occur primarily close to reporting period ends such as year-end or quarter-end

Question 15

Process alignment refers to ________.

Accepted Answer

A) the way that various IT systems are integrated to operate effectively as one system 
B) control activities to ensure records are properly retained and secured 
C) ensuring all network devices are at the current patch level 
D) ensuring that firewalls are in place,backed up by password protection over data access 
A) the way that various IT systems are integrated to operate effectively as one system 
B) control activities to ensure records are properly retained and secured 
C) ensuring all network devices are at the current patch level 
D) ensuring that firewalls are in place,backed up by password protection over data access

Question 16

Before concluding on the effectiveness of a control,an auditor must determine ________.

Accepted Answer

A) the required degree of company compliance with control procedures 
B) the maximum possible dollar amount that would not affect a user's decision based on the financial statements 
C) the actual degree of company compliance with control procedures 
D) the nature,extent,and timing of planned substantive procedures 
A) the required degree of company compliance with control procedures 
B) the maximum possible dollar amount that would not affect a user's decision based on the financial statements 
C) the actual degree of company compliance with control procedures 
D) the nature,extent,and timing of planned substantive procedures

Question 17

Controls such as those to protect inventory should be put in place no matter what the cost.

Accepted Answer

A) True 
 B)False

Question 18

Intent is something that the auditor can observe and use in deciding whether a misstatement is an error or a fraud.

Accepted Answer

A) True 
 B)False

Question 19

The most important feature of control is the documentation of the policies and procedures.

Accepted Answer

A) True 
 B)False

Question 20

The internal control objective of accuracy is related to the financial statement assertion of ________.

Accepted Answer

A) occurrence 
B) completeness 
C) valuation 
D) presentation 
A) occurrence 
B) completeness 
C) valuation 
D) presentation

Exam 9: Control Assessment and Testing

The internal control objective of ensuring that all sales on credit are recorded in accordance with GAAP is ________.

A clean audit is normally associated with weak controls.

Key controls are those ________.

The auditor's primary purpose for evaluating internal control is to ________.

The COSO definition of internal control says that internal control is a process to achieve objectives in which of the following categories?

Identify three general categories of misstatements and give an example of each.

The primary reason to evaluate internal control is to formulate constructive suggestions for improvement.

The Handbook section "Communication with Management of Matters Identified During the Financial Statement Audit" requires that ________.

Anyone who designs a processing system should ________.

What are the most cost-effective types of controls over data?

All audit engagements require some minimal reliance on internal controls.

What is a "walk through" test?

Why should an auditor not rely on substantive testing to the exclusion of testing internal controls?

Control tests should be applied to samples of transactions and control procedures ________.

Process alignment refers to ________.

Before concluding on the effectiveness of a control,an auditor must determine ________.

Controls such as those to protect inventory should be put in place no matter what the cost.

Intent is something that the auditor can observe and use in deciding whether a misstatement is an error or a fraud.

The most important feature of control is the documentation of the policies and procedures.

The internal control objective of accuracy is related to the financial statement assertion of ________.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

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