Exam 10: Section 404 Audits of Internal Control and Control Risk

If, when obtaining an understanding of control activities of a relatively small client, the auditor identified no control activities, the auditor would probably reassess whether the client is auditable.

As a client's information system becomes more complex, it is likely that an auditor will increase reliance on controls and decrease substantive tests to support a control risk assessment.

When one material weakness is present at the end of the year, management of a public company must conclude that internal control over financial reporting is:

Significant deficiencies are matters that come to an auditor's attention and should be communicated to an entity's audit committee because they represent:

When a company designs and implements internal controls, cost of the controls is not a valid consideration.

Adequate separation of duties is an important control activity. Discuss the four general guidelines for separation of duties to prevent both intentional and unintentional misstatements that are of significance to auditors.

Which of the following factors may increase risks to an organization?

You are the audit manager for a new audit client. Your staff auditors are unsure of what constitutes a control deficiency. Discuss the definition of control deficiency. In your response include at least two examples of control deficiencies.

Which of the following deficiency exists if a necessary control is missing or not properly formulated?

Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every:

Proper segregation of functional responsibilities calls for separation of:

When considering internal control, an auditor should be aware of the concept of reasonable assurance, which recognizes that the:

Which of the following is responsible for establishing a private company's internal control?

Describe the auditor's responsibilities related to required communications between the auditor and those charged with governance (remove auditor committee) regarding internal control.

Management must disclose material weaknesses in internal control in its audit report:

The Sarbanes-Oxley Act of 2002 requires that public companies issue an internal control report.

In an audit of a non-public company, the auditor's assessment of control risk and the extent of tests of controls are inversely related.

Describe each of the three broad objectives management typically has for internal control. With which of these objectives is the auditor primarily concerned?

The auditor's consideration of a private company's internal control is:

When internal controls are highly effective in processing accounting transactions, the extent of substantive tests should be reduced.