Question 1

An inherent weakness of all internal controls is:

Accepted Answer

A) They require highly educated people to implement. 
B) Performing tests of controls is more costly than obtaining substantive evidence. 
C) The potential for management to override them. 
D) Each control costs more money to implement. 
A) They require highly educated people to implement. 
B) Performing tests of controls is more costly than obtaining substantive evidence. 
C) The potential for management to override them. 
D) Each control costs more money to implement.

Question 2

An auditor should always check late entries in the accounting records with substantive procedures.

Accepted Answer

A) True 
 B)False

Question 3

If a control fails to prevent a sale from being recorded,it means the authorization control objective was not met

Accepted Answer

A) True 
 B)False

Question 4

Which internal control objectives relate to the financial statement assertion of valuation?

Accepted Answer

A) Validity,authorization,and proper period 
B) Authorization,classification,and validity. 
C) Completeness,accuracy,and proper period 
D) Authorization,classification,and accuracy 
A) Validity,authorization,and proper period 
B) Authorization,classification,and validity. 
C) Completeness,accuracy,and proper period 
D) Authorization,classification,and accuracy

Question 5

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 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

In general,a control deficiency will not affect control risk when ______.

Accepted Answer

A) The auditor is able to perform additional substantive tests. 
B) it is not guaranteed that the absent control will cause a material misstatement. 
C) the absent control has (a)compensating control(s)that effectively reduces 
D) It is a dual purpose control 
A) The auditor is able to perform additional substantive tests. 
B) it is not guaranteed that the absent control will cause a material misstatement. 
C) the absent control has (a)compensating control(s)that effectively reduces 
D) It is a dual purpose control

Question 8

An auditor has uncovered suspicious expense reimbursements paid to the chief executive officer of its audit client.What should the auditor do?

Accepted Answer

A) Discuss the matter with the chief executive officer. 
B) Report the matter in writing to the chief financial officer. 
C) Report the matter in writing to the audit committee. 
D) Report the matter in writing to the federal government. 
A) Discuss the matter with the chief executive officer. 
B) Report the matter in writing to the chief financial officer. 
C) Report the matter in writing to the audit committee. 
D) Report the matter in writing to the federal government.

Question 9

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 10

When the assessed level of inherent risk for material misstatement is not high,but the control risk is,the audit plan should call for:

Accepted Answer

A) Gathering a relatively low level of substantive audit evidence. 
B) Gathering a moderately persuasive level of planned substantive evidence. 
C) Performing extensive tests of controls to reduce control risk to an acceptably low level. 
D) Gathering a highly persuasive level of substantive evidence. 
A) Gathering a relatively low level of substantive audit evidence. 
B) Gathering a moderately persuasive level of planned substantive evidence. 
C) Performing extensive tests of controls to reduce control risk to an acceptably low level. 
D) Gathering a highly persuasive level of substantive evidence.

Question 11

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

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) A substantive 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) A substantive audit procedure carried out at the planning stage of an audit.

Question 13

The required degree of control compliance is determined by management's control objectives.

Accepted Answer

A) True 
 B)False

Question 14

The auditor's primary concern with regard to internal controls is ________.

Accepted Answer

A) the degree to which the internal controls are working as designed 
B) the possibility of an inherent risk that has to be controlled 
C) the impact the controls have on the accuracy of the accounting records 
D) the amount of substantive work to be saved by testing controls instead 
A) the degree to which the internal controls are working as designed 
B) the possibility of an inherent risk that has to be controlled 
C) the impact the controls have on the accuracy of the accounting records 
D) the amount of substantive work to be saved by testing controls instead

Question 15

Validity refers to ________.

Accepted Answer

A) ensuring that transactions are not omitted from accounting records 
B) ensuring that recorded transactions should have been recorded 
C) ensuring that all recorded transactions have been approved before recording 
D) ensuring that all recorded transactions have been recorded at the right dollar amount 
A) ensuring that transactions are not omitted from accounting records 
B) ensuring that recorded transactions should have been recorded 
C) ensuring that all recorded transactions have been approved before recording 
D) ensuring that all recorded transactions have been recorded at the right dollar amount

Question 16

A clean audit is normally associated with weak controls.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a control risk associated with manual controls?

Accepted Answer

A) lower effectiveness for high-volume or recurring transactions 
B) human error 
C) Inappropriate manual intervention 
D) relative ease of bypassing,ignoring,or overriding 
A) lower effectiveness for high-volume or recurring transactions 
B) human error 
C) Inappropriate manual intervention 
D) relative ease of bypassing,ignoring,or overriding

Question 18

Which of the following descriptions of job responsibilities reflects improper segregation of duties?

Accepted Answer

A) The person who handles receiving of goods also handles delivery of goods. 
B) The person who inputs sales invoices also inputs purchase invoices. 
C) The person who opens the mail is also the person who enters cash receipts. 
D) The person who verifies the accuracy of payroll inputs also authorizes sales returns. 
A) The person who handles receiving of goods also handles delivery of goods. 
B) The person who inputs sales invoices also inputs purchase invoices. 
C) The person who opens the mail is also the person who enters cash receipts. 
D) The person who verifies the accuracy of payroll inputs also authorizes sales returns.

Question 19

The objective of application control procedures is to process transactions correctly.

Accepted Answer

A) True 
 B)False

Question 20

The internal control objective of ensuring that all sales on credit are recorded at the proper dollar amounts is ________.

Accepted Answer

A) accuracy 
B) classification 
C) Completeness 
D) proper period cut-off 
A) accuracy 
B) classification 
C) Completeness 
D) proper period cut-off

Exam 9: Control Assessment and Testing

An inherent weakness of all internal controls is:

An auditor should always check late entries in the accounting records with substantive procedures.

If a control fails to prevent a sale from being recorded,it means the authorization control objective was not met

Which internal control objectives relate to the financial statement assertion of valuation?

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

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

In general,a control deficiency will not affect control risk when ______.

An auditor has uncovered suspicious expense reimbursements paid to the chief executive officer of its audit client.What should the auditor do?

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

When the assessed level of inherent risk for material misstatement is not high,but the control risk is,the audit plan should call for:

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

What is a "walk through" test?

The required degree of control compliance is determined by management's control objectives.

The auditor's primary concern with regard to internal controls is ________.

Validity refers to ________.

A clean audit is normally associated with weak controls.

Which of the following is not a control risk associated with manual controls?

Which of the following descriptions of job responsibilities reflects improper segregation of duties?

The objective of application control procedures is to process transactions correctly.

The internal control objective of ensuring that all sales on credit are recorded at the proper dollar amounts is ________.

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

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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