Question 1

Management's risk identification and analysis should include both internal and external risk factors.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is an example of a control environment deficiency?

Accepted Answer

A)  A low level of control consciousness within the organization.
B)  An audit committee that does not have independent members.
C)  An audit committee that is not viewed as the client of the external auditor.
D)  All of the above. D

Question 3

Segregation of duties is considered a part of the monitoring component of the COSO framework for internal control structure.

Accepted Answer

A) True 
 B)False  False

Question 4

A control designed to ensure that sales transactions are generated using the company's most current prices would be considered to be which type of control?

Accepted Answer

A)  An input control.
B)  A processing control.
C)  An output control.
D)  A physical control.

Question 5

A significant deficiency should be reported to the audit committee and to external users of an organization's financial statements.

Accepted Answer

A) True 
 B)False

Question 6

The information and communication component of internal control includes which of the following?

Accepted Answer

A)  The organization deploys control activities through policies that establish what is expected and in procedures that put policies into action.
B)  The organization obtains or generates and uses relevant,quality information to support the functioning of other components of internal control.
C)  The organization identifies and assesses changes that could significantly impact the system of internal control.
D)  All of the above.

Question 7

Management Evaluation of Internal Controls What are the steps in management's evaluation of internal control over financial reporting?

Accepted Answer

The answer of Management Evaluation of Internal Controls What are...

Question 8

Several significant deficiencies in internal controls may constitute a material weakness.

Accepted Answer

A) True 
 B)False

Question 9

The organization's risk assessment process is an example of an entity-wide control.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an inherent limitation of internal controls?

Accepted Answer

A)  Lack of auditor independence.
B)  Collusion.
C)  Separation of duties.
D)  Employee peer review.

Question 11

Requiring two signatures on any check in excess of $10,000 is an example of which type of control?

Accepted Answer

A)  Input control.
B)  Preventive control.
C)  Detective control.
D)  Processing control.

Question 12

One of the advantages of a computerized accounting system is that the computerized system eliminates the need for internal controls.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is considered to be an entity-wide control?

Accepted Answer

A)  Segregation of duties.
B)  Controls over management override.
C)  Authorization procedures for purchasing.
D)  Adequately documented transaction trails.

Question 14

Which of the following is another name for transaction controls?

Accepted Answer

A)  Entity-wide controls.
B)  Application controls.
C)  Supporting controls.
D)  Detail controls.

Question 15

A transaction trail includes the documents and records that allow an auditor to trace a transaction from its origination through to its final disposition,or vice versa.

Accepted Answer

A) True 
 B)False

Question 16

One of the components of internal control,monitoring,refers to the process of identifying,capturing,and exchanging information in a timely fashion to enable accomplishment of the organization's objectives.

Accepted Answer

A) True 
 B)False

Question 17

A deficiency in design of internal controls exists when an existing control is not properly designed so that,even if the control operates as designed,the control objective would not be met.

Accepted Answer

A) True 
 B)False

Question 18

Internal control is a process designed to achieve objectives in which one of the following categories?

Accepted Answer

A)  Reliability of financial reporting.
B)  Compliance with applicable laws.
C)  Operational effectiveness.
D)  All of the above.

Question 19

Segregation of duties is a control activity that is designed to protect against the risk that an individual could both perpetrate and cover up a fraud.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?

Accepted Answer

A)  Better understand the client,its risks,and how it manages those risks.
B)  Assess control risk and identify the types of financial statement misstatements that are most likely to occur.
C)  Plan direct tests of account balances to determine if misstatements have occurred.
D)  All are reasons why auditors must gain an understanding of the client's internal control system.

Exam 3: Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Management's risk identification and analysis should include both internal and external risk factors.

Which of the following is an example of a control environment deficiency?

Segregation of duties is considered a part of the monitoring component of the COSO framework for internal control structure.

A control designed to ensure that sales transactions are generated using the company's most current prices would be considered to be which type of control?

A significant deficiency should be reported to the audit committee and to external users of an organization's financial statements.

The information and communication component of internal control includes which of the following?

Management Evaluation of Internal Controls What are the steps in management's evaluation of internal control over financial reporting?

Several significant deficiencies in internal controls may constitute a material weakness.

The organization's risk assessment process is an example of an entity-wide control.

Which of the following is an inherent limitation of internal controls?

Requiring two signatures on any check in excess of $10,000 is an example of which type of control?

One of the advantages of a computerized accounting system is that the computerized system eliminates the need for internal controls.

Which of the following is considered to be an entity-wide control?

Which of the following is another name for transaction controls?

A transaction trail includes the documents and records that allow an auditor to trace a transaction from its origination through to its final disposition,or vice versa.

One of the components of internal control,monitoring,refers to the process of identifying,capturing,and exchanging information in a timely fashion to enable accomplishment of the organization's objectives.

A deficiency in design of internal controls exists when an existing control is not properly designed so that,even if the control operates as designed,the control objective would not be met.

Internal control is a process designed to achieve objectives in which one of the following categories?

Segregation of duties is a control activity that is designed to protect against the risk that an individual could both perpetrate and cover up a fraud.

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?