Question 1

The major limitation with the observation technique for testing controls is that:

Accepted Answer

A)  the employee may not be truthful in telling the auditor how the control procedure is performed. 
B)  the employee may perform the control procedure more diligently when they know they are being observed. 
C)  Both a and b 
D)  None of the above. 
A)  the employee may not be truthful in telling the auditor how the control procedure is performed. 
B)  the employee may perform the control procedure more diligently when they know they are being observed. 
C)  Both a and b 
D)  None of the above. B

Question 2

Which of the following would not be included in a test of control working paper?

Accepted Answer

A)  The purpose of the test 
B)  A conclusion about whether the account balance is materially misstated 
C)  The work performed 
D)  The findings/results of the testing 
A)  The purpose of the test 
B)  A conclusion about whether the account balance is materially misstated 
C)  The work performed 
D)  The findings/results of the testing B

Question 3

Tests of account balances can often provide evidence about the continued functioning of controls.

Accepted Answer

A) True 
 B)False  True

Question 4

What are the main items commonly included in tests of controls working papers?

Accepted Answer

In tests of controls working papers, the

Question 5

Which of the following is an example of a prevent 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 6

Explain the differences between prevent controls and detect controls.

Accepted Answer

Tests of controls (or controls testing)

Question 7

What are the factors considered by auditors in determining whether there is a need for additional detailed tests of controls?

Accepted Answer

In determining whether there is a need f

Question 8

Attribute sampling is a sampling technique used to reach a conclusion about the total dollar amount of misstatement in an account balance.

Accepted Answer

A) True 
 B)False

Question 9

Re-performance involves the auditor re-performing the control to test its effectiveness.

Accepted Answer

A) True 
 B)False

Question 10

The more complex the client's operations and its internal controls, the less experienced the auditor who performs the work needs to be.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

To improve efficiency, auditors test only those controls that they believe are critical to their opinion.

Accepted Answer

A) True 
 B)False

Question 13

Benchmarking is appropriate when:

Accepted Answer

A)  a reliable trail of program changes exists. 
B)  a programmed control can be matched to a defined program within an application. 
C)  the application is stable. 
D)  All of the above. 
A)  a reliable trail of program changes exists. 
B)  a programmed control can be matched to a defined program within an application. 
C)  the application is stable. 
D)  All of the above.

Question 14

Tests of controls do not include which of the following auditing techniques?

Accepted Answer

A)  Re-performance 
B)  Confirmation 
C)  Enquiry 
D)  Observation 
A)  Re-performance 
B)  Confirmation 
C)  Enquiry 
D)  Observation

Question 15

The Committee of Sponsoring Organisations (COSO) of the Treadway Commission has produced guidance for designing and implementing effective internal controls, as well as the effective monitoring of a system of internal controls. Explain the various aspects of this guidance and critically evaluate its impact at enhancing internal controls within companies.

Accepted Answer

The guidance provided by the Committee o

Question 16

If inherent risk is high and no assurance has been obtained from controls testing:

Accepted Answer

A)  only overall analytical review procedures need to be performed to reduce detection risk to an acceptable level. 
B)  no further substantive testing needs to be performed. 
C)  extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance. 
D)  None of the above. 
A)  only overall analytical review procedures need to be performed to reduce detection risk to an acceptable level. 
B)  no further substantive testing needs to be performed. 
C)  extensive substantive procedures need to be performed to estimate the dollar value of any error in the account balance. 
D)  None of the above.

Question 17

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 18

IT general controls are driven by the particular software application being used.

Accepted Answer

A) True 
 B)False

Question 19

The purpose of prevent 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 20

In trying to determine whether there is a need for additional detailed tests of controls, which of the following factors are considered?

Accepted Answer

A)  Evidence provided by other tests 
B)  Changes in the overall control environment 
C)  Results of enquiries and observations 
D)  All of the above 
A)  Evidence provided by other tests 
B)  Changes in the overall control environment 
C)  Results of enquiries and observations 
D)  All of the above

The major limitation with the observation technique for testing controls is that:

Which of the following would not be included in a test of control working paper?

Tests of account balances can often provide evidence about the continued functioning of controls.

What are the main items commonly included in tests of controls working papers?

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

Explain the differences between prevent controls and detect controls.

What are the factors considered by auditors in determining whether there is a need for additional detailed tests of controls?

Attribute sampling is a sampling technique used to reach a conclusion about the total dollar amount of misstatement in an account balance.

Re-performance involves the auditor re-performing the control to test its effectiveness.

The more complex the client's operations and its internal controls, the less experienced the auditor who performs the work needs to be.

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

To improve efficiency, auditors test only those controls that they believe are critical to their opinion.

Benchmarking is appropriate when:

Tests of controls do not include which of the following auditing techniques?

If inherent risk is high and no assurance has been obtained from controls testing:

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

IT general controls are driven by the particular software application being used.

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

In trying to determine whether there is a need for additional detailed tests of controls, which of the following factors are considered?

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment 1

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters

Exam 8: Execution of the Audit Testing of Controls

The major limitation with the observation technique for testing controls is that:

Which of the following would not be included in a test of control working paper?

Tests of account balances can often provide evidence about the continued functioning of controls.

What are the main items commonly included in tests of controls working papers?

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

Explain the differences between prevent controls and detect controls.

What are the factors considered by auditors in determining whether there is a need for additional detailed tests of controls?

Attribute sampling is a sampling technique used to reach a conclusion about the total dollar amount of misstatement in an account balance.

Re-performance involves the auditor re-performing the control to test its effectiveness.

The more complex the client's operations and its internal controls, the less experienced the auditor who performs the work needs to be.

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

To improve efficiency, auditors test only those controls that they believe are critical to their opinion.

Benchmarking is appropriate when:

Tests of controls do not include which of the following auditing techniques?

If inherent risk is high and no assurance has been obtained from controls testing:

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

IT general controls are driven by the particular software application being used.

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

In trying to determine whether there is a need for additional detailed tests of controls, which of the following factors are considered?

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Risk Assessment 1

Risk Assessment II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Sampling and Overview of the Risk Response Phase of the Audit

Execution of the Audit Performing Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters