Question 1

A five-step approach can be used to identify deficiencies,significant deficiencies,and material weaknesses.The first step in this approach is

Accepted Answer

A) identify the absence of key controls. 
B) consider the possibility of compensating controls. 
C) determine potential misstatements that could result. 
D) identify existing controls.

Question 2

When documenting their understanding of a client's internal controls,auditors are required to use narratives.

Accepted Answer

A) True 
 B)False

Question 3

When using the test data approach,

Accepted Answer

A) auditors process test data supplied by the client. 
B) auditors often obtain assistance from a computer audit specialist. 
C) the tests must be performed at the end of the year. 
D) the test data must remain in the client's records.

Question 4

The embedded audit module approach requires the auditor to insert an audit module in the client's application system to to identify specific types of transactions.

Accepted Answer

A) True 
 B)False

Question 5

A narrative should describe the disposition of every document and record in the system.

Accepted Answer

A) True 
 B)False

Question 6

A significant internal control deficiency is always considered a material weakness.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an accurate statement relating to the extent of procedures?

Accepted Answer

A) If an auditor wants a lower assessed control risk than the preliminary assessed control risk,the number of controls tested increases while the extent of the tests for each control decrease. 
B) The extent of testing depends on the frequency of the operation of the controls. 
C) All controls must be tested only at year-end. 
D) The frequency of testing is the same for both manual and computer controls.

Question 8

You are the audit manager for a new audit client.Your staff auditors are unsure of what constitutes a control deficiency.Discuss the terms control deficiency,design deficiency,and operating deficiency.

Accepted Answer

The answer of You are the audit manager for a...

Question 9

The auditor will issue an unqualified opinion on internal control over financial reporting when

Accepted Answer

A) there are no identified material weaknesses as of the end of the fiscal year. 
B) there have been no restrictions on the scope of the auditor's work. 
C) both a and b 
D) either a or b

Question 10

A company's size should have no impact on the nature of internal control and the controls that are implemented.

Accepted Answer

A) True 
 B)False

Question 11

Describe three computer auditing techniques available to the auditor.

Accepted Answer

The answer of Describe three computer auditing techniques available to...

Question 12

If,when obtaining an understanding of control activities of a relatively small client,the auditor identified no control activities,the auditor would probably set a high assessment of control risk.

Accepted Answer

A) True 
 B)False

Question 13

If the results of tests of controls support the design and operations of controls as expected,the auditor uses ________ control risk as the preliminary assessment.

Accepted Answer

A) a lower 
B) the same 
C) a higher 
D) either a lower or higher

Question 14

When testing manual or automated controls,

Accepted Answer

A) automated controls are always subject to random error or manipulation. 
B) automated controls cannot be altered by making a change to the software application. 
C) when there are effective general controls and automated application controls,the auditor will need to select a larger sample size of transactions to verify. 
D) the extent of testing depends on whether it is a manual or automated control.

Question 15

Parallel simulation is used primarily to test internal controls over the client's IT systems,whereas the test data approach is used primarily for substantive testing.

Accepted Answer

A) True 
 B)False

Question 16

Before making the final assessment of internal control at the end of an audit,the auditor must

Accepted Answer

A)   
B)   
C)   
D)

Question 17

The objective of the test data approach is to determine whether the client's computer programs can correctly process valid and invalid transactions.

Accepted Answer

A) True 
 B)False

Question 18

In an audit of a nonpublic company,the less control risk there is,the smaller the amount of planned substantive evidence that is required.

Accepted Answer

A) True 
 B)False

Question 19

A(n)________ control is a control elsewhere in the system that offsets the absence of a key control.

Accepted Answer

A) significant 
B) alternate 
C) design 
D) compensating

Question 20

When using the test data approach,

Accepted Answer

A) test data should include data that the client's system should accept or reject. 
B) application programs tested by the auditor's test data must be different from those used by the client throughout the year. 
C) select data may remain in the client system after testing. 
D) None of the above statements is correct.

Exam 12: Assessing Control Risk and Reporting on Internal Controls

A five-step approach can be used to identify deficiencies,significant deficiencies,and material weaknesses.The first step in this approach is

When documenting their understanding of a client's internal controls,auditors are required to use narratives.

When using the test data approach,

The embedded audit module approach requires the auditor to insert an audit module in the client's application system to to identify specific types of transactions.

A narrative should describe the disposition of every document and record in the system.

A significant internal control deficiency is always considered a material weakness.

Which of the following is an accurate statement relating to the extent of procedures?

You are the audit manager for a new audit client.Your staff auditors are unsure of what constitutes a control deficiency.Discuss the terms control deficiency,design deficiency,and operating deficiency.

The auditor will issue an unqualified opinion on internal control over financial reporting when

A company's size should have no impact on the nature of internal control and the controls that are implemented.

Describe three computer auditing techniques available to the auditor.

If,when obtaining an understanding of control activities of a relatively small client,the auditor identified no control activities,the auditor would probably set a high assessment of control risk.

If the results of tests of controls support the design and operations of controls as expected,the auditor uses ________ control risk as the preliminary assessment.

When testing manual or automated controls,

Parallel simulation is used primarily to test internal controls over the client's IT systems,whereas the test data approach is used primarily for substantive testing.

Before making the final assessment of internal control at the end of an audit,the auditor must

The objective of the test data approach is to determine whether the client's computer programs can correctly process valid and invalid transactions.

In an audit of a nonpublic company,the less control risk there is,the smaller the amount of planned substantive evidence that is required.

A(n) ________ control is a control elsewhere in the system that offsets the absence of a key control.

When using the test data approach,