Question 1

Which of the following statements is correct?

Accepted Answer

A)  Tests of account balances can often provide evidence about the continued functioning of controls. 
B)  An ineffective entity-level control environment may allow the auditor to limit their tests of controls to enquiry and observation. 
C)  Auditors do not need to investigate any control exceptions identified during their testing. 
D)  Tests of account balances never provide evidence about the continued functioning of controls. 
A)  Tests of account balances can often provide evidence about the continued functioning of controls. 
B)  An ineffective entity-level control environment may allow the auditor to limit their tests of controls to enquiry and observation. 
C)  Auditors do not need to investigate any control exceptions identified during their testing. 
D)  Tests of account balances never provide evidence about the continued functioning of controls.

Question 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

The concept that no one employee should be in a position both to perpetrate and hide errors
or fraud in the normal course of their duties is known as segregation of incompatible duties.

Accepted Answer

A) True 
 B)False

Question 5

Theo Lillis performs the following application control procedures: (i) Control totals: Input totals are balanced and reconciled
(ii) Reasonable checks: Actual data is compared to expected data for reasonableness
(iii) Sequence tests: Sequential data is reviewed and exception reports are produced for missing numbers.
Which of the above application controls do these procedures apply to?

Accepted Answer

A)  processing controls 
B)  output controls 
C)  input controls 
D)  general controls 
A)  processing controls 
B)  output controls 
C)  input controls 
D)  general controls

Question 6

CAS 260 Communication with Those Charged with Governance requires auditors to communicate audit matters of governance interest arising from the audit of the financial report with those charged with governance of an entity. What are some examples of these matters and why is it important for auditors to communicate them?

Accepted Answer

Some examples of audit matters of govern

Question 7

Detection risk refers to

Accepted Answer

A)  the susceptibility of an assertion to a material misstatement, assuming there are no related controls. 
B)  the risk that the auditor's testing procedures will not be effective in detecting a material misstatement. 
C)  the risk that a client's system of internal controls will not prevent or detect a material misstatement. 
D)  none of the above 
A)  the susceptibility of an assertion to a material misstatement, assuming there are no related controls. 
B)  the risk that the auditor's testing procedures will not be effective in detecting a material misstatement. 
C)  the risk that a client's system of internal controls will not prevent or detect a material misstatement. 
D)  none of the above

Question 8

As part of her yearly audit plan activities, Krystyne Sliz reviews audit working papers of previous years to determine the risk that a client's system of internal controls will not prevent or
Detect a material misstatement. This review refers to

Accepted Answer

A)  audit risk. 
B)  inherent risk. 
C)  control risk. 
D)  detection risk. 
A)  audit risk. 
B)  inherent risk. 
C)  control risk. 
D)  detection risk.

Question 9

One of the factors considered by the auditor in determining if there is a need for additional detailed tests of controls is

Accepted Answer

A)  evaluation of substantive tests. 
B)  evidence provided by other tests. 
C)  timing of audit tests. 
D)  availability of qualitative and quantitative audit evidence. 
A)  evaluation of substantive tests. 
B)  evidence provided by other tests. 
C)  timing of audit tests. 
D)  availability of qualitative and quantitative audit evidence.

Question 10

The inherent limitations of internal control include the possibility of collusion by two or more
individuals to circumvent a control.

Accepted Answer

A) True 
 B)False

Question 11

In the United States, what have been the major impacts on companies and auditors of section 404 of the Sarbanes-Oxley Act (2002)? Has this section improved the quality of companies' internal controls?

Accepted Answer

Section 404 of the Sarbanes-Oxley Act (2

Question 12

What are the most common forms of documentation used by auditors to document their understanding of internal controls?

Accepted Answer

The most common forms of documentation i

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Significant professional judgment is not necessary in deciding whether a weakness identified is significant enough to warrant communicating to management. 
B)  A management letter is prepared by management. 
C)  Significant professional judgment is necessary in deciding whether a weakness identified is significant enough to warrant communicating to management. 
D)  all of the above 
A)  Significant professional judgment is not necessary in deciding whether a weakness identified is significant enough to warrant communicating to management. 
B)  A management letter is prepared by management. 
C)  Significant professional judgment is necessary in deciding whether a weakness identified is significant enough to warrant communicating to management. 
D)  all of the above

Question 14

Explain the seven generally accepted objectives of internal control activities and identify the relevant assertions.

Accepted Answer

The internal control objectives are matc

Question 15

Which audit assertion is not addressed by the internal control objectives?

Accepted Answer

A)  valuation 
B)  allocation 
C)  classification 
D)  presentation 
A)  valuation 
B)  allocation 
C)  classification 
D)  presentation

Question 16

An internal control exception is an observed condition that provides evidence that the control
being tested did not operate as intended.

Accepted Answer

A) True 
 B)False

Question 17

The two main objectives of internal controls are

Accepted Answer

A)  to support the automated parts of the business in the functioning of the controls in place. 
B)  to prevent or detect misstatements in the financial statements. 
C)  both a and b 
D)  none of the above 
A)  to support the automated parts of the business in the functioning of the controls in place. 
B)  to prevent or detect misstatements in the financial statements. 
C)  both a and b 
D)  none of the above

Question 18

When Melissa Lee, a senior auditor, performed an audit of an electronics firm, she reviewed the control environment, performed a risk assessment, and reviewed the key business
Processes and control activities. These activities are part of

Accepted Answer

A)  a review of entity-level controls. 
B)  a review of the internal control system. 
C)  establishing audit risk. 
D)  none of the above 
A)  a review of entity-level controls. 
B)  a review of the internal control system. 
C)  establishing audit risk. 
D)  none of the above

Question 19

The internal control objective of 'classified' means there are controls in place to ensure that

Accepted Answer

A)  fictitious or duplicate transactions are not included in the books of an organization. 
B)  correct amounts are assigned to transactions. 
C)  transactions are recorded in the correct accounting period. 
D)  transactions are charged and allocated to the correct general ledger account. 
A)  fictitious or duplicate transactions are not included in the books of an organization. 
B)  correct amounts are assigned to transactions. 
C)  transactions are recorded in the correct accounting period. 
D)  transactions are charged and allocated to the correct general ledger account.

Question 20

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

Which of the following statements is correct?

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

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

The concept that no one employee should be in a position both to perpetrate and hide errors or fraud in the normal course of their duties is known as segregation of incompatible duties.

Detection risk refers to

As part of her yearly audit plan activities, Krystyne Sliz reviews audit working papers of previous years to determine the risk that a client's system of internal controls will not prevent or Detect a material misstatement. This review refers to

One of the factors considered by the auditor in determining if there is a need for additional detailed tests of controls is

The inherent limitations of internal control include the possibility of collusion by two or more individuals to circumvent a control.

In the United States, what have been the major impacts on companies and auditors of section 404 of the Sarbanes-Oxley Act (2002)? Has this section improved the quality of companies' internal controls?

What are the most common forms of documentation used by auditors to document their understanding of internal controls?

Which of the following statements is correct?

Explain the seven generally accepted objectives of internal control activities and identify the relevant assertions.

Which audit assertion is not addressed by the internal control objectives?

An internal control exception is an observed condition that provides evidence that the control being tested did not operate as intended.

The two main objectives of internal controls are

When Melissa Lee, a senior auditor, performed an audit of an electronics firm, she reviewed the control environment, performed a risk assessment, and reviewed the key business Processes and control activities. These activities are part of

The internal control objective of 'classified' means there are controls in place to ensure that

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

Introduction and Review of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Audit Planning I

Audit Planning II

Audit Evidence

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Performing Substantive Procedures

Auditing Sales and Receivables

Auditing Purchases, Payables and Payroll

Auditing Inventories and PPE

Auditing Cash and Investments

Completing and Reporting on the Audit

Filters

Exam 7: Understanding and Testing the Clients System of Internal Controls

Which of the following statements is correct?

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

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

The concept that no one employee should be in a position both to perpetrate and hide errors or fraud in the normal course of their duties is known as segregation of incompatible duties.

Detection risk refers to

As part of her yearly audit plan activities, Krystyne Sliz reviews audit working papers of previous years to determine the risk that a client's system of internal controls will not prevent or Detect a material misstatement. This review refers to

One of the factors considered by the auditor in determining if there is a need for additional detailed tests of controls is

The inherent limitations of internal control include the possibility of collusion by two or more individuals to circumvent a control.

In the United States, what have been the major impacts on companies and auditors of section 404 of the Sarbanes-Oxley Act (2002)? Has this section improved the quality of companies' internal controls?

What are the most common forms of documentation used by auditors to document their understanding of internal controls?

Which of the following statements is correct?

Explain the seven generally accepted objectives of internal control activities and identify the relevant assertions.

Which audit assertion is not addressed by the internal control objectives?

An internal control exception is an observed condition that provides evidence that the control being tested did not operate as intended.

The two main objectives of internal controls are

When Melissa Lee, a senior auditor, performed an audit of an electronics firm, she reviewed the control environment, performed a risk assessment, and reviewed the key business Processes and control activities. These activities are part of

The internal control objective of 'classified' means there are controls in place to ensure that

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

Introduction and Review of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Audit Planning I

Audit Planning II

Audit Evidence

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Performing Substantive Procedures

Auditing Sales and Receivables

Auditing Purchases, Payables and Payroll

Auditing Inventories and PPE

Auditing Cash and Investments

Completing and Reporting on the Audit

Filters