Question 1

The auditor's primary purpose in auditing the client's system of internal control over financial reporting is

Accepted Answer

A)  to prevent fraudulent financial statements from being issued to the public. 
B)  to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements. 
C)  to report to management that the internal controls are effective in preventing misstatements from appearing on the financial statements. 
D)  to efficiently conduct the Audit of Financial Statements. 
A)  to prevent fraudulent financial statements from being issued to the public. 
B)  to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements. 
C)  to report to management that the internal controls are effective in preventing misstatements from appearing on the financial statements. 
D)  to efficiently conduct the Audit of Financial Statements.

Question 2

Two key concepts underlie management's design and implementation of internal controls are absolute assurance and inherent limitations.

Accepted Answer

A) True 
 B)False

Question 3

The auditor's responsibilities for internal control include understanding and testing the audit client's internal controls over financial reporting.

Accepted Answer

A) True 
 B)False

Question 4

LANs link equipment within a single or small cluster of buildings and are used within a company.

Accepted Answer

A) True 
 B)False

Question 5

General controls include all of the following except

Accepted Answer

A)  systems development. 
B)  online security. 
C)  processing controls. 
D)  hardware controls. 
A)  systems development. 
B)  online security. 
C)  processing controls. 
D)  hardware controls.

Question 6

Discuss the four areas of responsibility under the IT function that should be segregated in large companies.

Accepted Answer

The responsibilities for IT management,

Question 7

The company forms a committee to identify specific risks inside of the company related to information technology. As shown in the COSO cube, this action is related to organizational structure.

Accepted Answer

A) True 
 B)False

Question 8

What are the four underlying principles related to risk assessment every organization should consider?

Accepted Answer

1. The organization should have clear ob

Question 9

To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because

Accepted Answer

A)  management may establish appropriate policies and procedures but not act on them. 
B)  the board of directors may not be aware of management's attitude toward the control environment. 
C)  the auditor may believe that the policies and procedures are inappropriate for that particular entity. 
D)  the policies and procedures may be so weak that no reliance is contemplated by the auditor. 
A)  management may establish appropriate policies and procedures but not act on them. 
B)  the board of directors may not be aware of management's attitude toward the control environment. 
C)  the auditor may believe that the policies and procedures are inappropriate for that particular entity. 
D)  the policies and procedures may be so weak that no reliance is contemplated by the auditor.

Question 10

Output controls focus on preventing errors during processing.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not an application control?

Accepted Answer

A)  reprocessing authorization of sales transactions 
B)  reasonableness test for unit selling price of sale 
C)  post-processing review of sales transactions by the sales department 
D)  logging in to the company's information systems via a password 
A)  reprocessing authorization of sales transactions 
B)  reasonableness test for unit selling price of sale 
C)  post-processing review of sales transactions by the sales department 
D)  logging in to the company's information systems via a password

Question 12

Management has a legal and a professional responsibility to be sure external financial information, and the information contained therein, are fairly presented in accordance with generally accepted accounting principles and International Financial Reporting Standards, when required.

Accepted Answer

A) True 
 B)False

Question 13

Identify the six categories of general controls and give one example of each.

Accepted Answer

General controls fall into the following

Question 14

The PCAOB places responsibility for the reliability of internal controls over the financial reporting process on

Accepted Answer

A)  the company's board of directors. 
B)  the audit committee of the board of directors. 
C)  management. 
D)  the CFO and the independent auditors. 
A)  the company's board of directors. 
B)  the audit committee of the board of directors. 
C)  management. 
D)  the CFO and the independent auditors.

Question 15

The Sarbanes-Oxley Act requires

Accepted Answer

A)  all public companies to issue reports on internal controls. 
B)  all public companies to define adequate internal controls. 
C)  the auditor of public companies to design effective internal controls. 
D)  the auditor of public companies to withdraw from an engagement if internal controls are weak. 
A)  all public companies to issue reports on internal controls. 
B)  all public companies to define adequate internal controls. 
C)  the auditor of public companies to design effective internal controls. 
D)  the auditor of public companies to withdraw from an engagement if internal controls are weak.

Question 16

It is possible, under certain circumstances, for financial statements to correctly reflect GAAP or IFRS even if internal controls over financial reporting are inadequate.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not one of the three primary objectives of effective internal control?

Accepted Answer

A)  reliability of financial reporting 
B)  efficiency and effectiveness of operations 
C)  compliance with laws and regulations 
D)  assurance of elimination of business risk 
A)  reliability of financial reporting 
B)  efficiency and effectiveness of operations 
C)  compliance with laws and regulations 
D)  assurance of elimination of business risk

Question 18

The audit committee of the board of directors must exercise oversight over the design and the performance of internal controls over financial reporting, as well as not delegating the responsibilities for these internal controls to management.

Accepted Answer

A) True 
 B)False

Question 19

Identify the three categories of application controls, and give one example of each.

Accepted Answer

Application controls fall into three cat

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 11: Internal Control and Coso Framework

The auditor's primary purpose in auditing the client's system of internal control over financial reporting is

Two key concepts underlie management's design and implementation of internal controls are absolute assurance and inherent limitations.

The auditor's responsibilities for internal control include understanding and testing the audit client's internal controls over financial reporting.

LANs link equipment within a single or small cluster of buildings and are used within a company.

General controls include all of the following except

Discuss the four areas of responsibility under the IT function that should be segregated in large companies.

The company forms a committee to identify specific risks inside of the company related to information technology. As shown in the COSO cube, this action is related to organizational structure.

What are the four underlying principles related to risk assessment every organization should consider?

To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because

Output controls focus on preventing errors during processing.

Which of the following is not an application control?

Management has a legal and a professional responsibility to be sure external financial information, and the information contained therein, are fairly presented in accordance with generally accepted accounting principles and International Financial Reporting Standards, when required.

Identify the six categories of general controls and give one example of each.

The PCAOB places responsibility for the reliability of internal controls over the financial reporting process on

The Sarbanes-Oxley Act requires

It is possible, under certain circumstances, for financial statements to correctly reflect GAAP or IFRS even if internal controls over financial reporting are inadequate.

Which of the following is not one of the three primary objectives of effective internal control?

The audit committee of the board of directors must exercise oversight over the design and the performance of internal controls over financial reporting, as well as not delegating the responsibilities for these internal controls to management.

Identify the three categories of application controls, and give one example of each.

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

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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