Question 1

The auditor always needs to investigate any control exceptions (deviations) that he or she identifies during testing to find out, to the extent practical, _______.

Accepted Answer

A) the causes and the amounts involved 
B) the financial statement accounts affected 
C) the potential effect on other audit procedures 
D) All of these answer choices are correct.

Question 2

An observed condition that provides evidence that the control being tested did not operate as intended is called a/an _______.

Accepted Answer

A) control exception 
B) significant deficiency 
C) attribute sampling 
D) material weakness

Question 3

In preparing a working paper for tests of controls, _______.

Accepted Answer

A) the auditor would ordinarily set out the purpose of the financial statements audited 
B) the auditor would ordinarily set out the purpose of the tests of the controls identified 
C) the auditor would request input and amendments from senior management 
D) the auditor would complete the working paper with the help of the client's legal counsel

Question 4

If there is a high risk of material fraud related to an assertion, _______.

Accepted Answer

A) the auditor will want to test controls over that assertion 
B) the auditor will want to test controls over other assertions 
C) the auditor should request the audit be conducted by the internal audit function 
D) the auditor should withdraw from the engagement, to avoid risk exposure

Question 5

Tolerable deviation rate is the maximum rate of deviation from a prescribed control that an auditor is willing to accept and still use the planned assessed level control risk.

Accepted Answer

A) True 
 B)False

Question 6

The technique that involves the auditor using questioning skills to determine how the control is completed and whether it appears to have been carried out properly and on a timely basis is known as _______.

Accepted Answer

A) inquiry 
B) observation 
C) reperformance 
D) recalculation

Question 7

The extent of the auditor's documentation will increase if _______.

Accepted Answer

A) the complexity of the client's operations, systems, and controls increases 
B) the complexity of the client's operations, systems, and controls decreases 
C) the auditor making on the documentation is more experienced 
D) the auditor making on the documentation is less experienced

Question 8

In the given table, match the components of working paper on the left with their details on the right.

Accepted Answer

The answer of In the given table, match the components...

Question 9

The fourth step in assessing control risk is _______.

Accepted Answer

A) understand entity-level controls 
B) understand the flow of transactions 
C) identify relevant controls to test 
D) perform tests of controls

Question 10

In the given table, match the concepts related to control risks on the left with the descriptions on the right.

Accepted Answer

The answer of In the given table, match the concepts...

Question 11

Auditors of both public companies and private entities _______.

Accepted Answer

A) have a responsibility to report internal control weaknesses to those charged with governance of the entity 
B) have a responsibility to report internal control weaknesses directly to the SEC 
C) have a responsibility to report internal control weaknesses to the internal audit function, for immediate rectification 
D) have a responsibility to report internal control weaknesses directly to the shareholders of an entity, who in turn should address their concerns to management

Question 12

If the auditor wants to test using the _______ technique, he must find evidence that the control was performed on a timely basis.

Accepted Answer

The answer of If the auditor wants to test using...

Question 13

Which of the following refer(s) to the audit procedures designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level?

Accepted Answer

A) Tests of controls 
B) Financial auditing 
C) External controls 
D) Transaction-level controls

Question 14

Assessing control risk begins with understanding entity-level controls.

Accepted Answer

A) True 
 B)False

Question 15

If the auditor determines that an internal control deficiency is either a significant deficiency or a control deficiency, the auditor will issue a/an _______ on internal controls over financial reporting (ICFR).
[unqualified opinion] | adverse opinion | modified opinion | unmodified opinion

Accepted Answer

The answer of If the auditor determines that an internal...

Question 16

Bob Jensen is the staff auditor on the Banson Fashion audit.Bob performed tests of controls over the control "the accounts receivable subsidiary ledger reconciliation is reviewed by the financial controller".The objective of the test was to verify that a review by the financial controller occurred on a timely basis.When performing the testing, however, Bob found that while there was evidence of the review (a signature), there was no date, so timeliness could not be verified.What can Bob conclude from this test result and what should Bob do next?

Accepted Answer

The answer of Bob Jensen is the staff auditor on...

Question 17

After the auditor has completed test of controls and drawn a conclusion about control risk, _______.

Accepted Answer

A) the auditor will want to make decisions about the nature, timing and extent of substantive testing 
B) the auditor will want to make decisions about the nature of substantive testing 
C) the auditor will want to make decisions about the timing of substantive testing 
D) the auditor will want to make decisions about the extent of substantive testing

Question 18

A common software-based audit technique involves _______.

Accepted Answer

A) requesting management complete flowcharts and questionnaires related to the audit 
B) submitting certain test data into the client's software application while the auditor is in control of the software 
C) allowing the internal auditors access to the external auditor's software application in order to assist with the audit 
D) deleting client files and transactions to ensure that the client's software appropriately alerts the correct staff

Question 19

If the auditor intends to assess control risk at a low level, _______.

Accepted Answer

A) he or she performs more testing than if he or she is planning to obtain only limited assurance from tests of controls 
B) he or she performs less testing than if he or she is planning to obtain only limited assurance from tests of controls 
C) he or she performs the same amount of testing if he or she is planning to obtain only limited assurance from tests of controls 
D) he or she performs more testing than if he or she is planning to obtain unlimited assurance from tests of controls

Question 20

After the auditor completes test of controls and draws conclusion about control risk, the auditor makes decisions about the nature, timing, and extent of _______.
[substantive testing] | sampling risk | non-sampling risk | control exception

Accepted Answer

The answer of After the auditor completes test of controls...

Exam 8: Risk Responseperforming Tests of Controls