Question 1

Integrity and ethical behavior ________.

Accepted Answer

A) are provided by the auditor to the client in training sessions 
B) are of no concern, for they are always present 
C) are the products of the organization's ethical and behavioral standards 
D) should start at the bottom and work their way up the organization

Question 2

_______ is a key component of the overall audit risk assessment and provides evidence that influences the resulting audit strategy developed by the auditor.
|[Control risk |] Inherent risk | Audit risk | Client risk

Accepted Answer

The answer of _______ is a key component of the...

Question 3

Which of the following is a deficiency in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented on a timely basis?

Accepted Answer

A) Material weakness 
B) Deficiency in internal control 
C) Significant deficiency 
D) Immaterial weakness

Question 4

If you place a control that the computer checks run-to-run total of beginning receivables, plus sales transactions with the sum of ending receivables, which of the following risks will you be addressing?

Accepted Answer

A) Invoices not journalized or posted to customer accounts 
B) Sales invoices recorded in the incorrect accounting period 
C) Products shipped without shipping documents being generated 
D) Sale made without credit approval

Question 5

Which application control matches the classification (or transaction) code against the master list of codes permitted for the type of transaction to be processed?

Accepted Answer

A) Valid code check 
B) Missing data check 
C) Limit check 
D) Valid character check

Question 6

Establishing an appropriate level of professional skepticism is achieved by ________.

Accepted Answer

A) gaining an understanding of the entity-level (or entity-wide) internal control components 
B) talking to the internal audit function 
C) discussions with the client's attorney 
D) a directive from the audit partner in charge

Question 7

The management letter should ________.

Accepted Answer

A) be prepared by the audit team, be provided to the client, and discuss internal control weaknesses and other matters discovered during the audit 
B) only discuss internal control weaknesses 
C) be sent at the beginning of the engagement 
D) also be sent to the client's attorneys as a matter of course

Question 8

A top-down approach begins by _____.

Accepted Answer

A) considering what can go wrong in the financial statements 
B) considering which members of top management might be committing fraud 
C) assigning the highest ranking and most experienced members of an audit team to an audit 
D) sending questionnaires to top management to complete before interviewing any mid-level management employees

Question 9

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that ________ ________.(choose two options).

Accepted Answer

A) is less severe than a material weakness 
B) merits attention by those charged with governance 
C) is more severe than a material weakness 
D) does not merit attention by those charged with governance

Question 10

_______ controls are designed to provide reasonable assurance that IT records, processes and reports data properly for specific applications.
manual | independent | [computer application ] | IT system

Accepted Answer

The answer of _______ controls are designed to provide reasonable...

Question 11

Logic diagrams provide ________.

Accepted Answer

A) a visual perspective of the flow of the transactions and key controls throughout the flow that is often simpler for the reader or reviewer to understand 
B) a description (in words) of each step of the flow of a transaction from start to finish (that is, from initiation to reporting in the financial report 
C) a process flowchart on the left-hand side and the narrative describing each step in the flow on the right-hand side 
D) extensive description of steps detailing all aspects of transaction in the internal control processes

Question 12

_______ are controls that affect a particular transaction or group of transactions
Entity level controls | [ Transaction level controls] | Audit controls | Client controls

Accepted Answer

The answer of _______ are controls that affect a particular...

Question 13

The most commonly accepted global auditing framework for internal control is the integrated framework developed by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Accepted Answer

A) True 
 B)False

Question 14

When the auditor identifies internal control weaknesses, ________.

Accepted Answer

A) control risk is increased 
B) control risk is decreased 
C) risk of material misstatement decreases 
D) inherent risk is decreased

Question 15

An important outcome of understanding the client's system of internal control is the auditor's ability to ________.

Accepted Answer

A) guarantee there are no misstatements in the financial statements 
B) make recommendations on costs savings related to internal control 
C) make observations, draw conclusions and offer recommendations regarding the strengths and weaknesses observed 
D) ensure an unqualified audit opinion in regard to the financial statements

Question 16

An entity's risk assessment process ________.

Accepted Answer

A) should be reevaluated every five years to respond to changing market conditions and threats 
B) should only solicit feedback from and be crafted by top management 
C) is its process for identifying and responding to risks that an organization will not achieve its objectives 
D) is the same as the auditor's consideration of risk

Question 17

While initiating sales, errors in which two of the following documents or files could mean the risk of sales being made to unauthorized customers?

Accepted Answer

A) Customer master file 
B) Sales order 
C) Sales invoice 
D) Perpetual inventory

Question 18

In a top-down approach to understanding internal control over financial reporting and selecting the specific internal controls to test, the auditor focuses on _______-level controls.

Accepted Answer

A) entity 
B) division 
C) operating unit 
D) function

Question 19

If an employee who has access to the custody of assets steals a cash remittance and covers the theft by recording a bad-debt write off, there was likely a failure in the category of __________.

Accepted Answer

A) segregation of duties 
B) performance reviews 
C) authorization control 
D) physical controls

Question 20

What group or groups of application controls are widely recognized?

Accepted Answer

A) Input, timing, and service controls 
B) Timing, service, and processing controls 
C) Processing, output, and service controls 
D) Input, processing, and output controls

Exam 6: Understanding of the Clients System of Internal Controls

Integrity and ethical behavior ________.

_______ is a key component of the overall audit risk assessment and provides evidence that influences the resulting audit strategy developed by the auditor. |[Control risk |] Inherent risk | Audit risk | Client risk

Which of the following is a deficiency in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented on a timely basis?

If you place a control that the computer checks run-to-run total of beginning receivables, plus sales transactions with the sum of ending receivables, which of the following risks will you be addressing?

Which application control matches the classification (or transaction) code against the master list of codes permitted for the type of transaction to be processed?

Establishing an appropriate level of professional skepticism is achieved by ________.

The management letter should ________.

A top-down approach begins by _____.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that .(choose two options) .

_______ controls are designed to provide reasonable assurance that IT records, processes and reports data properly for specific applications. manual | independent | [computer application ] | IT system

Logic diagrams provide ________.

_______ are controls that affect a particular transaction or group of transactions Entity level controls | [ Transaction level controls] | Audit controls | Client controls

The most commonly accepted global auditing framework for internal control is the integrated framework developed by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

When the auditor identifies internal control weaknesses, ________.

An important outcome of understanding the client's system of internal control is the auditor's ability to ________.

An entity's risk assessment process ________.

While initiating sales, errors in which two of the following documents or files could mean the risk of sales being made to unauthorized customers?

In a top-down approach to understanding internal control over financial reporting and selecting the specific internal controls to test, the auditor focuses on _______-level controls.

If an employee who has access to the custody of assets steals a cash remittance and covers the theft by recording a bad-debt write off, there was likely a failure in the category of __________.

What group or groups of application controls are widely recognized?

Exam 6: Understanding of the Clients System of Internal Controls

Integrity and ethical behavior ________.

_______ is a key component of the overall audit risk assessment and provides evidence that influences the resulting audit strategy developed by the auditor. |[Control risk |] Inherent risk | Audit risk | Client risk

Which of the following is a deficiency in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented on a timely basis?

If you place a control that the computer checks run-to-run total of beginning receivables, plus sales transactions with the sum of ending receivables, which of the following risks will you be addressing?

Which application control matches the classification (or transaction) code against the master list of codes permitted for the type of transaction to be processed?

Establishing an appropriate level of professional skepticism is achieved by ________.

The management letter should ________.

A top-down approach begins by _____.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that ________ ________.(choose two options) .

_______ controls are designed to provide reasonable assurance that IT records, processes and reports data properly for specific applications. manual | independent | [computer application ] | IT system

Logic diagrams provide ________.

_______ are controls that affect a particular transaction or group of transactions Entity level controls | [ Transaction level controls] | Audit controls | Client controls

The most commonly accepted global auditing framework for internal control is the integrated framework developed by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

When the auditor identifies internal control weaknesses, ________.

An important outcome of understanding the client's system of internal control is the auditor's ability to ________.

An entity's risk assessment process ________.

While initiating sales, errors in which two of the following documents or files could mean the risk of sales being made to unauthorized customers?

In a top-down approach to understanding internal control over financial reporting and selecting the specific internal controls to test, the auditor focuses on _______-level controls.

If an employee who has access to the custody of assets steals a cash remittance and covers the theft by recording a bad-debt write off, there was likely a failure in the category of __________.

What group or groups of application controls are widely recognized?

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that .(choose two options) .