Question 1

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

Accepted Answer

A)  flowcharts. 
B)  narratives. 
C)  preformatted questionnaires. 
D)  all of the above 
A)  flowcharts. 
B)  narratives. 
C)  preformatted questionnaires. 
D)  all of the above

Question 2

What are control activities and explain the major categories of them?

Accepted Answer

Control activities are policies and proc

Question 3

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 4

Which of the following statements is incorrect?

Accepted Answer

A)  The less frequently a control is performed, the more testing the auditor needs to perform to be satisfied the control is operating effectively. 
B)  When other controls related to a particular objective are also in place and are tested, the level of assurance that might be needed from any one control is not as high as if the auditor were relying solely on a single control. 
C)  The less frequently a control is performed, the less testing the auditor needs to perform to be satisfied the control is operating effectively. 
D)  The results of the tests in prior audits and the current audit to date affect the perception of risk. 
A)  The less frequently a control is performed, the more testing the auditor needs to perform to be satisfied the control is operating effectively. 
B)  When other controls related to a particular objective are also in place and are tested, the level of assurance that might be needed from any one control is not as high as if the auditor were relying solely on a single control. 
C)  The less frequently a control is performed, the less testing the auditor needs to perform to be satisfied the control is operating effectively. 
D)  The results of the tests in prior audits and the current audit to date affect the perception of risk.

Question 5

When Vanessa Lanthier reviewed the different key activities in the marketing department of a wholesaler of jewellery, she was performing an entity level review of

Accepted Answer

A)  monitoring controls. 
B)  the control environment. 
C)  internal controls. 
D)  the risk assessment process. 
A)  monitoring controls. 
B)  the control environment. 
C)  internal controls. 
D)  the risk assessment process.

Question 6

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 7

The working papers to document tests of controls

Accepted Answer

A)  detail the audit plan. 
B)  set out the purpose of the tests of controls identified. 
C)  provide instructions of details of tests to be conducted. 
D)  all of the above 
A)  detail the audit plan. 
B)  set out the purpose of the tests of controls identified. 
C)  provide instructions of details of tests to be conducted. 
D)  all of the above

Question 8

One of the elements of an entity's control environment is management's philosophy and
operating style.

Accepted Answer

A) True 
 B)False

Question 9

An example of a program change control is

Accepted Answer

A)  the accounts receivable clerk does not have access to the cash payments application. 
B)  regular and timely back-ups of data. 
C)  program change forms must be authorized by the IT manager. 
D)  all of the above 
A)  the accounts receivable clerk does not have access to the cash payments application. 
B)  regular and timely back-ups of data. 
C)  program change forms must be authorized by the IT manager. 
D)  all of the above

Question 10

The generally accepted objectives of internal control do not include

Accepted Answer

A)  efficiency. 
B)  classified. 
C)  recorded. 
D)  timely. 
A)  efficiency. 
B)  classified. 
C)  recorded. 
D)  timely.

Question 11

Stanley Morgan has learned that it is important to be aware of the attitude and actions of management and those charged with governance concerning the entity's internal control and its
Importance in the entity. This best describes dealing with

Accepted Answer

A)  a key control objective. 
B)  the control environment. 
C)  mitigation of audit risk. 
D)  financial statement assertions. 
A)  a key control objective. 
B)  the control environment. 
C)  mitigation of audit risk. 
D)  financial statement assertions.

Question 12

Which of the following is an example of a preventive control?

Accepted Answer

A)  management level reviews of actual performance versus budgets 
B)  credit manager following up on an exception report showing sales made to a customer who has exceeded their credit limit 
C)  sales invoices are automatically priced using the information in the price master file 
D)  a bank reconciliation 
A)  management level reviews of actual performance versus budgets 
B)  credit manager following up on an exception report showing sales made to a customer who has exceeded their credit limit 
C)  sales invoices are automatically priced using the information in the price master file 
D)  a bank reconciliation

Question 13

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

Accepted Answer

A)  the extent to which performance of control activities relies on IT. 
B)  the extent to which controls included in the organization's policies are being applied. 
C)  whether adequate safeguards are in place to prevent unauthorized access to or destruction of documents, records and assets. 
D)  all of the above 
A)  the extent to which performance of control activities relies on IT. 
B)  the extent to which controls included in the organization's policies are being applied. 
C)  whether adequate safeguards are in place to prevent unauthorized access to or destruction of documents, records and assets. 
D)  all of the above

Question 14

Internal control weaknesses identified by an auditor

Accepted Answer

A)  decrease the level of substantive tests to be implemented by the auditor. 
B)  increase the risk of material misstatements being undetected by the auditor's testing procedures. 
C)  increase the risk of material misstatement being undetected by management's processes and controls. 
D)  decrease the risk of material misstatements being undetected by the auditor's testing procedures. 
A)  decrease the level of substantive tests to be implemented by the auditor. 
B)  increase the risk of material misstatements being undetected by the auditor's testing procedures. 
C)  increase the risk of material misstatement being undetected by management's processes and controls. 
D)  decrease the risk of material misstatements being undetected by the auditor's testing procedures.

Question 15

Flowcharts are used by an auditor to

Accepted Answer

A)  document the generalized computer audit programs. 
B)  document the audit client's accounting controls. 
C)  provide a checklist of internal controls. 
D)  provide a description of the audit client's accounting controls. 
A)  document the generalized computer audit programs. 
B)  document the audit client's accounting controls. 
C)  provide a checklist of internal controls. 
D)  provide a description of the audit client's accounting controls.

Question 16

Emile Mayer 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?

Accepted Answer

A)  information processing controls 
B)  physical controls 
C)  authorization controls 
D)  segregation of incompatible duties 
A)  information processing controls 
B)  physical controls 
C)  authorization controls 
D)  segregation of incompatible duties

Question 17

The senior auditor has no physical evidence that a control was performed, who performed it, or how effectively it was performed. What is the nature of this control?

Accepted Answer

A)  internal control 
B)  entity-level control 
C)  detective control 
D)  preventive control 
A)  internal control 
B)  entity-level control 
C)  detective control 
D)  preventive control

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  evaluations or observations made by the external auditors. 
B)  management's approach to correcting known significant deficiencies on a timely basis. 
C)  both a and b 
D)  none of the above 
A)  evaluations or observations made by the external auditors. 
B)  management's approach to correcting known significant deficiencies on a timely basis. 
C)  both a and b 
D)  none of the above

Question 20

What is a management letter and what are its major purposes?

Accepted Answer

A management letter (sometimes referred

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

What are control activities and explain the major categories of them?

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

Which of the following statements is incorrect?

When Vanessa Lanthier reviewed the different key activities in the marketing department of a wholesaler of jewellery, she was performing an entity level review of

Manual controls

The working papers to document tests of controls

One of the elements of an entity's control environment is management's philosophy and operating style.

An example of a program change control is

The generally accepted objectives of internal control do not include

Stanley Morgan has learned that it is important to be aware of the attitude and actions of management and those charged with governance concerning the entity's internal control and its Importance in the entity. This best describes dealing with

Which of the following is an example of a preventive control?

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

Internal control weaknesses identified by an auditor

Flowcharts are used by an auditor to

Emile Mayer 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 senior auditor has no physical evidence that a control was performed, who performed it, or how effectively it was performed. What is the nature of this control?

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

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

What is a management letter and what are its major purposes?

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

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

What are control activities and explain the major categories of them?

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

Which of the following statements is incorrect?

When Vanessa Lanthier reviewed the different key activities in the marketing department of a wholesaler of jewellery, she was performing an entity level review of

Manual controls

The working papers to document tests of controls

One of the elements of an entity's control environment is management's philosophy and operating style.

An example of a program change control is

The generally accepted objectives of internal control do not include

Stanley Morgan has learned that it is important to be aware of the attitude and actions of management and those charged with governance concerning the entity's internal control and its Importance in the entity. This best describes dealing with

Which of the following is an example of a preventive control?

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

Internal control weaknesses identified by an auditor

Flowcharts are used by an auditor to

Emile Mayer 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 senior auditor has no physical evidence that a control was performed, who performed it, or how effectively it was performed. What is the nature of this control?

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

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

What is a management letter and what are its major purposes?

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