Question 1

The auditors' communication of internal control significant deficiencies should be addressed only to senior management of the company.

Accepted Answer

A) True 
 B)False

Question 2

Controls are not designed to provide assurance that:

Accepted Answer

A) Transactions are executed in accordance with management's authorization. 
B) Fraud will be eliminated. 
C) Access to assets is permitted only in accordance with management's authorization. 
D) The recorded accountability for assets is compared with the existing assets at reasonable intervals. 
A) Transactions are executed in accordance with management's authorization. 
B) Fraud will be eliminated. 
C) Access to assets is permitted only in accordance with management's authorization. 
D) The recorded accountability for assets is compared with the existing assets at reasonable intervals.

Question 3

This organization developed a set of criteria that provide management with a basis to evaluate controls not only over financial reporting,but also over the effectiveness and efficiency of operations and compliance with laws and regulations:

Accepted Answer

A) Foreign Corrupt Practices Corporation. 
B) Committee of Sponsoring Organizations. 
C) Cohen Commission. 
D) Financial Accounting Standards Board. 
A) Foreign Corrupt Practices Corporation. 
B) Committee of Sponsoring Organizations. 
C) Cohen Commission. 
D) Financial Accounting Standards Board.

Question 4

The auditors who become aware of an internal control significant deficiency are required to communicate this to the:

Accepted Answer

A) Client's legal counsel. 
B) Compensation committee. 
C) Audit committee. 
D) Internal auditors. 
A) Client's legal counsel. 
B) Compensation committee. 
C) Audit committee. 
D) Internal auditors.

Question 5

Which of the following is not a component of the control environment?

Accepted Answer

A) Integrity and ethical values. 
B) Risk assessment. 
C) Commitment to attracting,developing,and retaining competent employees. 
D) Organizational structure. 
A) Integrity and ethical values. 
B) Risk assessment. 
C) Commitment to attracting,developing,and retaining competent employees. 
D) Organizational structure.

Question 6

Well-designed internal control that is functioning effectively is most likely to detect a fraud arising from:

Accepted Answer

A) The fraudulent action of several employees. 
B) The fraudulent action of an individual employee. 
C) Informal deviations from the official organization chart. 
D) Management fraud. 
A) The fraudulent action of several employees. 
B) The fraudulent action of an individual employee. 
C) Informal deviations from the official organization chart. 
D) Management fraud.

Question 7

When a client uses a service organization to process certain transactions (e.g. ,its employee benefit plan),the auditor is least likely to obtain an understanding relating to these transactions by

Accepted Answer

A) Contacting the service organization to obtain specific information. 
B) Visiting the service organization and performing procedures. 
C) Sending a confirmation request to the service organization. 
D) Obtaining and reading a Type 1 or Type 2 report from the service organization. 
A) Contacting the service organization to obtain specific information. 
B) Visiting the service organization and performing procedures. 
C) Sending a confirmation request to the service organization. 
D) Obtaining and reading a Type 1 or Type 2 report from the service organization.

Question 8

Internal control is a process that provides reasonable assurance concerning reliability of financial information.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would be least likely to be considered a benefit of effective internal control?

Accepted Answer

A) Enhancing profitability. 
B) Restricting access to assets. 
C) Detecting ineffectiveness. 
D) Ensuring authorization of transactions. 
A) Enhancing profitability. 
B) Restricting access to assets. 
C) Detecting ineffectiveness. 
D) Ensuring authorization of transactions.

Question 10

An auditor's purpose for performing tests of controls is to provide reasonable assurance that:

Accepted Answer

A) Controls are operating effectively. 
B) The risk that the auditor may unknowingly fail to modify the opinion on the financial statements is minimized. 
C) Transactions are executed in accordance with management's authorization and access to assets is limited by a segregation of functions. 
D) Transactions are recorded as necessary to permit the preparation of the financial statements in conformity with generally accepted accounting principles. 
A) Controls are operating effectively. 
B) The risk that the auditor may unknowingly fail to modify the opinion on the financial statements is minimized. 
C) Transactions are executed in accordance with management's authorization and access to assets is limited by a segregation of functions. 
D) Transactions are recorded as necessary to permit the preparation of the financial statements in conformity with generally accepted accounting principles.

Question 11

A significant deficiency:

Accepted Answer

A) Differs from a material weakness in that it involves internal control over operations rather than internal control over financial reporting. 
B) Involves an amount of discovered misstatements greater than the amount used as the planning measure of materiality. 
C) Is identical to a material weakness except that it need not be communicated to those responsible for oversight of the company's financial reporting. 
D) Is less severe than a material weakness. 
A) Differs from a material weakness in that it involves internal control over operations rather than internal control over financial reporting. 
B) Involves an amount of discovered misstatements greater than the amount used as the planning measure of materiality. 
C) Is identical to a material weakness except that it need not be communicated to those responsible for oversight of the company's financial reporting. 
D) Is less severe than a material weakness.

Question 12

Of the following statements about internal control,which one is not valid?

Accepted Answer

A) No one person should be responsible for the custodial responsibility and the recording responsibility for an asset. 
B) Transactions must be properly authorized before such transactions are processed. 
C) Because of the cost/benefit relationship,a client may apply control procedures on a test basis. 
D) Control activities ensure all fraud will be eliminated. 
A) No one person should be responsible for the custodial responsibility and the recording responsibility for an asset. 
B) Transactions must be properly authorized before such transactions are processed. 
C) Because of the cost/benefit relationship,a client may apply control procedures on a test basis. 
D) Control activities ensure all fraud will be eliminated.

Question 13

Which of the following is not a primary procedure auditors use to obtain sufficient knowledge about the design of the relevant controls and to determine whether they have been implemented (placed in operation)?

Accepted Answer

A) Previous experience with the entity. 
B) Inquiries of appropriate management personnel. 
C) Performance of substantive procedures. 
D) Inspection of document and records. 
A) Previous experience with the entity. 
B) Inquiries of appropriate management personnel. 
C) Performance of substantive procedures. 
D) Inspection of document and records.

Question 14

After documenting the client's prescribed internal control,the auditors will often perform a walk-through of each transaction cycle.An objective of a walk-through is to:

Accepted Answer

A) Verify that the controls have been implemented (placed in operation). 
B) Replace tests of controls. 
C) Evaluate the major strengths and weaknesses in the client's internal control. 
D) Identify weaknesses to be communicated to management in the management letter. 
A) Verify that the controls have been implemented (placed in operation). 
B) Replace tests of controls. 
C) Evaluate the major strengths and weaknesses in the client's internal control. 
D) Identify weaknesses to be communicated to management in the management letter.

Question 15

If the external auditors decide that the work performed by the internal auditors may be used,they should consider the internal auditors':

Accepted Answer

A) Competence,objectivity,and approach. 
B) Efficiency and experience. 
C) Independence and review skills. 
D) Training and supervisory skills. 
A) Competence,objectivity,and approach. 
B) Efficiency and experience. 
C) Independence and review skills. 
D) Training and supervisory skills.

Question 16

Which of the following would least likely be included in an auditor's tests of controls?

Accepted Answer

A) Inspection. 
B) Observation. 
C) Inquiry. 
D) Analytical procedures. 
A) Inspection. 
B) Observation. 
C) Inquiry. 
D) Analytical procedures.

Question 17

Which of the following is not ordinarily considered a factor indicative of increased financial reporting risk when an auditor is considering a client's risk assessment policies?

Accepted Answer

A) Salaried sales personnel. 
B) Implementation of a new information system. 
C) Rapid growth of the organization. 
D) Corporate restructuring. 
A) Salaried sales personnel. 
B) Implementation of a new information system. 
C) Rapid growth of the organization. 
D) Corporate restructuring.

The auditors' communication of internal control significant deficiencies should be addressed only to senior management of the company.

Controls are not designed to provide assurance that:

This organization developed a set of criteria that provide management with a basis to evaluate controls not only over financial reporting,but also over the effectiveness and efficiency of operations and compliance with laws and regulations:

The auditors who become aware of an internal control significant deficiency are required to communicate this to the:

Which of the following is not a component of the control environment?

Well-designed internal control that is functioning effectively is most likely to detect a fraud arising from:

When a client uses a service organization to process certain transactions (e.g. ,its employee benefit plan),the auditor is least likely to obtain an understanding relating to these transactions by

Internal control is a process that provides reasonable assurance concerning reliability of financial information.

Which of the following would be least likely to be considered a benefit of effective internal control?

An auditor's purpose for performing tests of controls is to provide reasonable assurance that:

A significant deficiency:

Of the following statements about internal control,which one is not valid?

Which of the following is not a primary procedure auditors use to obtain sufficient knowledge about the design of the relevant controls and to determine whether they have been implemented (placed in operation)?

After documenting the client's prescribed internal control,the auditors will often perform a walk-through of each transaction cycle.An objective of a walk-through is to:

If the external auditors decide that the work performed by the internal auditors may be used,they should consider the internal auditors':

Which of the following would least likely be included in an auditor's tests of controls?

Which of the following is not ordinarily considered a factor indicative of increased financial reporting risk when an auditor is considering a client's risk assessment policies?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters

Exam 7: Internal Control

The auditors' communication of internal control significant deficiencies should be addressed only to senior management of the company.

Controls are not designed to provide assurance that:

This organization developed a set of criteria that provide management with a basis to evaluate controls not only over financial reporting,but also over the effectiveness and efficiency of operations and compliance with laws and regulations:

The auditors who become aware of an internal control significant deficiency are required to communicate this to the:

Which of the following is not a component of the control environment?

Well-designed internal control that is functioning effectively is most likely to detect a fraud arising from:

When a client uses a service organization to process certain transactions (e.g. ,its employee benefit plan),the auditor is least likely to obtain an understanding relating to these transactions by

Internal control is a process that provides reasonable assurance concerning reliability of financial information.

Which of the following would be least likely to be considered a benefit of effective internal control?

An auditor's purpose for performing tests of controls is to provide reasonable assurance that:

A significant deficiency:

Of the following statements about internal control,which one is not valid?

Which of the following is not a primary procedure auditors use to obtain sufficient knowledge about the design of the relevant controls and to determine whether they have been implemented (placed in operation)?

After documenting the client's prescribed internal control,the auditors will often perform a walk-through of each transaction cycle.An objective of a walk-through is to:

If the external auditors decide that the work performed by the internal auditors may be used,they should consider the internal auditors':

Which of the following would least likely be included in an auditor's tests of controls?

Which of the following is not ordinarily considered a factor indicative of increased financial reporting risk when an auditor is considering a client's risk assessment policies?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters