Exam 8: Internal control and control risk

Effective internal control in a small company that has an insufficient number of employees to permit proper division of responsibilities can BEST be enhanced by:

Management's integrity and ethical values include:

Adequate documents and records is a subcomponent of the control environment.

For proper internal control, there should be adequate separation of duties.However, the extent of separation of duties considered 'adequate' depends heavily on the size of the organisation.

It is important for the auditor to consider the competence of the audit client's employees because their competence bears directly and importantly upon the:

For proper internal control, the custodianship of cash, including receipts and disbursements, should be the responsibility of the accounting department.

Internal controls can NEVER be regarded as completely effective.Even if systems personnel could design an ideal system, its effectiveness depends on the:

Significant deficiencies in internal control are first communicated by auditors to the:

When internal controls are not effective, then substantive audit tests are less reliable; thus, the extent of substantive tests should be increased.

Which one of the following audit tests would be regarded as a test of a control?

Of the three broad objectives of management when designing an effective system of internal control, which is of most concern to the external auditor?

An auditor will use an internal control questionnaire as a means to:

Narratives, flowcharts, and internal control questionnaires are three common methods of:

There is a significant overlap between tests of controls and procedures to obtain an understanding of controls; however, discuss the main differences in the types of audit evidence.

During which part of an audit examination is the preparation of flowcharts most appropriate?

The auditor considers internal control by four steps.What is the order for these steps? 1) Obtain an understanding of internal control. 2) Assess control risk. 3) Perform tests of controls. 4) Decide on planned detection risk and substantive testing.

The reason for NOT permitting a person who has temporary or permanent custody of an asset to account for that asset is to protect the company primarily against:

All of the following are characteristics of an accounting information system EXCEPT:

Inquiry as a type of audit evidence is used extensively in procedures to gain an understanding of controls.

Management typically has the following three concerns, or broad objectives, in designing an effective control system: 1)reliability of financial reporting 2)efficient and effective operations 3)compliance with applicable laws and regulations 4)maximise profit for stakeholders