Question 1

A key modifying assumption in internal control is that the internal control system is the responsibility of management.

Accepted Answer

A) True 
 B)False

Question 2

List the four broad objectives of the internal control system.

Accepted Answer

safeguard assets,
ensure the a

Question 3

Both the SEC and the PCAOB have expressed an opinion as which internal control framework an organization should use to comply with SOX legislation. Explain.

Accepted Answer

Both the SEC and PCAOB endorse

Question 4

Application controls apply to a wide range of exposures that threaten the integrity of all programs processed within the computer environment.

Accepted Answer

A) True 
 B)False

Question 5

Corporate management (including the CEO) must certify monthly and annually their organization's internal controls over financial reporting.

Accepted Answer

A) True 
 B)False

Question 6

Attestation services require all of the following except

Accepted Answer

A)  written assertions and a practitioner's written report 
B)  the engagement is designed to conduct risk assessment of the client's systems to verify their degree of SOX compliance 
C)  the formal establishment of measurements criteria 
D)  the engagement is limited to examination, review, and application of agreed-upon procedures 
A)  written assertions and a practitioner's written report 
B)  the engagement is designed to conduct risk assessment of the client's systems to verify their degree of SOX compliance 
C)  the formal establishment of measurements criteria 
D)  the engagement is limited to examination, review, and application of agreed-upon procedures

Question 7

The financial statements of an organization reflect a set of management assertions about the financial health of the business. All of the following describe types of assertions except

Accepted Answer

A)  that all of the assets and equities on the balance sheet exist 
B)  that all employees are properly trained to carry out their assigned duties 
C)  that all transactions on the income statement actually occurred 
D)  that all allocated amounts such as depreciation are calculated on a systematic and rational basis 
A)  that all of the assets and equities on the balance sheet exist 
B)  that all employees are properly trained to carry out their assigned duties 
C)  that all transactions on the income statement actually occurred 
D)  that all allocated amounts such as depreciation are calculated on a systematic and rational basis

Question 8

The bank reconciliation uncovered a transposition error in the books. This is an example of a

Accepted Answer

A)  preventive control 
B)  detective control 
C)  corrective control 
D)  none of the above 
A)  preventive control 
B)  detective control 
C)  corrective control 
D)  none of the above

Question 9

Prior to SOX, external auditors were required to be familiar with the client organization's internal controls, but not test them. Explain.

Accepted Answer

Auditors had the option of not relying o

Question 10

Contrast internal and external auditing.

Accepted Answer

Internal auditing is an independent appr

Question 11

Tests of controls include

Accepted Answer

A)  confirming accounts receivable 
B)  counting inventory 
C)  completing questionnaires 
D)  counting cash 
A)  confirming accounts receivable 
B)  counting inventory 
C)  completing questionnaires 
D)  counting cash

Question 12

Explain how general controls impact transaction integrity and the financial reporting process.

Accepted Answer

Consider an organization with poor datab

Question 13

How do the tests of controls affect substantive tests?

Accepted Answer

Tests of controls are used by the audito

Question 14

Which of the following is not an element of the internal control environment?

Accepted Answer

A)  management philosophy and operating style 
B)  organizational structure of the firm 
C)  well-designed documents and records 
D)  the functioning of the board of directors and the audit committee 
A)  management philosophy and operating style 
B)  organizational structure of the firm 
C)  well-designed documents and records 
D)  the functioning of the board of directors and the audit committee

Question 15

The PCAOB's standard No. 2 specifically requires auditors to understand transaction flows in designing their test of controls. What steps does this entail?

Accepted Answer

This involves:
1. Selecting the financia

Question 16

Which of the following is NOT an implication of section 302 of the Sarbanes-Oxley Act?

Accepted Answer

A)  Auditors must determine, whether changes in internal control has, or is likely to, materially affect internal control over financial reporting. 
B)  Auditors must interview management regarding significant changes in the design or operation of internal control that occurred since the last audit. 
C)  Corporate management (including the CEO) must certify monthly and annually their organization's internal controls over financial reporting. 
D)  Management must disclose any material changes in the company's internal controls that have occurred during the most recent fiscal quarter. 
A)  Auditors must determine, whether changes in internal control has, or is likely to, materially affect internal control over financial reporting. 
B)  Auditors must interview management regarding significant changes in the design or operation of internal control that occurred since the last audit. 
C)  Corporate management (including the CEO) must certify monthly and annually their organization's internal controls over financial reporting. 
D)  Management must disclose any material changes in the company's internal controls that have occurred during the most recent fiscal quarter.

Question 17

While the Sarbanes-Oxley Act prohibits auditors from providing non-accounting services to their audit clients, they are not prohibited from performing such services for non-audit clients or privately held companies.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following suggests a weakness in the internal control environment?

Accepted Answer

A)  the firm has an up-to-date organizational chart 
B)  monthly reports comparing actual performance to budget are distributed to managers 
C)  performance evaluations are prepared every three years 
D)  the audit committee meets quarterly with the external auditors 
A)  the firm has an up-to-date organizational chart 
B)  monthly reports comparing actual performance to budget are distributed to managers 
C)  performance evaluations are prepared every three years 
D)  the audit committee meets quarterly with the external auditors

Question 19

The decision to extend credit beyond the normal credit limit is an example of

Accepted Answer

A)  independent verification 
B)  authorization 
C)  segregation of functions 
D)  supervision 
A)  independent verification 
B)  authorization 
C)  segregation of functions 
D)  supervision

Question 20

Substantive tests include

Accepted Answer

A)  examining the safety deposit box for stock certificates 
B)  reviewing systems documentation 
C)  completing questionnaires 
D)  observation 
A)  examining the safety deposit box for stock certificates 
B)  reviewing systems documentation 
C)  completing questionnaires 
D)  observation

A key modifying assumption in internal control is that the internal control system is the responsibility of management.

List the four broad objectives of the internal control system.

Both the SEC and the PCAOB have expressed an opinion as which internal control framework an organization should use to comply with SOX legislation. Explain.

Application controls apply to a wide range of exposures that threaten the integrity of all programs processed within the computer environment.

Corporate management (including the CEO) must certify monthly and annually their organization's internal controls over financial reporting.

Attestation services require all of the following except

The financial statements of an organization reflect a set of management assertions about the financial health of the business. All of the following describe types of assertions except

The bank reconciliation uncovered a transposition error in the books. This is an example of a

Prior to SOX, external auditors were required to be familiar with the client organization's internal controls, but not test them. Explain.

Contrast internal and external auditing.

Tests of controls include

Explain how general controls impact transaction integrity and the financial reporting process.

How do the tests of controls affect substantive tests?

Which of the following is not an element of the internal control environment?

The PCAOB's standard No. 2 specifically requires auditors to understand transaction flows in designing their test of controls. What steps does this entail?

Which of the following is NOT an implication of section 302 of the Sarbanes-Oxley Act?

While the Sarbanes-Oxley Act prohibits auditors from providing non-accounting services to their audit clients, they are not prohibited from performing such services for non-audit clients or privately held companies.

Which of the following suggests a weakness in the internal control environment?

The decision to extend credit beyond the normal credit limit is an example of

Substantive tests include

Auditing IT Governance Controls

Auditing Operating Systems and Networks

Auditing Database Systems

Systems Development and Program Change Activities

Transaction Processing and Financial Reporting Systems Overview

Computer Assisted Audit Tools and Techniques

Data Structures and Caatts for Data Extraction

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Enterprise Resource Planning Systems

Business Ethics, Fraud, and Fraud Detection

Filters

Exam 1: Auditing and Internal Control

A key modifying assumption in internal control is that the internal control system is the responsibility of management.

List the four broad objectives of the internal control system.

Both the SEC and the PCAOB have expressed an opinion as which internal control framework an organization should use to comply with SOX legislation. Explain.

Application controls apply to a wide range of exposures that threaten the integrity of all programs processed within the computer environment.

Corporate management (including the CEO) must certify monthly and annually their organization's internal controls over financial reporting.

Attestation services require all of the following except

The financial statements of an organization reflect a set of management assertions about the financial health of the business. All of the following describe types of assertions except

The bank reconciliation uncovered a transposition error in the books. This is an example of a

Prior to SOX, external auditors were required to be familiar with the client organization's internal controls, but not test them. Explain.

Contrast internal and external auditing.

Tests of controls include

Explain how general controls impact transaction integrity and the financial reporting process.

How do the tests of controls affect substantive tests?

Which of the following is not an element of the internal control environment?

The PCAOB's standard No. 2 specifically requires auditors to understand transaction flows in designing their test of controls. What steps does this entail?

Which of the following is NOT an implication of section 302 of the Sarbanes-Oxley Act?

While the Sarbanes-Oxley Act prohibits auditors from providing non-accounting services to their audit clients, they are not prohibited from performing such services for non-audit clients or privately held companies.

Which of the following suggests a weakness in the internal control environment?

The decision to extend credit beyond the normal credit limit is an example of

Substantive tests include

Auditing IT Governance Controls

Auditing Operating Systems and Networks

Auditing Database Systems

Systems Development and Program Change Activities

Transaction Processing and Financial Reporting Systems Overview

Computer Assisted Audit Tools and Techniques

Data Structures and Caatts for Data Extraction

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Enterprise Resource Planning Systems

Business Ethics, Fraud, and Fraud Detection

Filters