Question 1

Which of the following client internal control activities is not usually performed in the treasurer's department?

Accepted Answer

A) Verifying the accuracy of checks and vouchers 
B) Controlling the mailing of checks to vendors 
C) Approving vendors' invoices for payment 
D) Canceling payment vouchers when paid 
A) Verifying the accuracy of checks and vouchers 
B) Controlling the mailing of checks to vendors 
C) Approving vendors' invoices for payment 
D) Canceling payment vouchers when paid

Question 2

Which of the following is not an objective of internal controls over financial reporting as defined by the Sarbanes-Oxley Act?

Accepted Answer

A) Policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant. 
B) Policies and procedures that provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant. 
C) Policies and procedures that provide reasonable assurance regarding the compliance with applicable laws and regulations. 
D) Policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use or disposition of the registrant's assets that could have a material effect on the financial statements. 
A) Policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant. 
B) Policies and procedures that provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant. 
C) Policies and procedures that provide reasonable assurance regarding the compliance with applicable laws and regulations. 
D) Policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use or disposition of the registrant's assets that could have a material effect on the financial statements.

Question 3

A sales clerk enters a customer's six-number customer account.The computer program uses the first five numbers to calculate a sixth number.This resulting number is then compared to the sixth number entered by the sales clerk.This is an example of a

Accepted Answer

A) a valid character test. 
B) missing data test. 
C) reasonableness test. 
D) check digit. 
A) a valid character test. 
B) missing data test. 
C) reasonableness test. 
D) check digit.

Question 4

Control strengths and weaknesses should be documented in audit documentation,sometimes called

Accepted Answer

A) questionnaires,narratives,and flowcharts. 
B) bridge working papers. 
C) communications of significant deficiencies. 
D) internal control letters. 
A) questionnaires,narratives,and flowcharts. 
B) bridge working papers. 
C) communications of significant deficiencies. 
D) internal control letters.

Question 5

If a control total were to be computed on each of the following data items,which would best be identified as a hash total for a payroll IT application?

Accepted Answer

A) Hours worked 
B) Total debits and total credits 
C) Net pay 
D) Department numbers 
A) Hours worked 
B) Total debits and total credits 
C) Net pay 
D) Department numbers

Question 6

What is the difference between a significant deficiency and a material weakness?

Accepted Answer

The difference between a signi

Question 7

In computer systems,the information technology general controls (ITGC)would not include

Accepted Answer

A) processing control activities. 
B) separation of various computer system functions. 
C) appropriate documentation of the data processing system. 
D) control over physical access to computer hardware. 
A) processing control activities. 
B) separation of various computer system functions. 
C) appropriate documentation of the data processing system. 
D) control over physical access to computer hardware.

Question 8

Which of the following factors is most likely to affect the extent of the documentation of the auditor's understanding of a client's system of internal controls?

Accepted Answer

A) The industry and the business and regulatory environments in which the client operates 
B) The degree to which information technology is used in the accounting function 
C) The relationship between management,the board of directors,and external stakeholders 
D) The degree to which the auditor intends to use internal audit personnel to perform substantive tests 
A) The industry and the business and regulatory environments in which the client operates 
B) The degree to which information technology is used in the accounting function 
C) The relationship between management,the board of directors,and external stakeholders 
D) The degree to which the auditor intends to use internal audit personnel to perform substantive tests

Question 9

When the audit team increases the planned assessed level of control risk because certain control activities were determined to be ineffective,the audit team would most likely increase the

Accepted Answer

A) extent of substantive tests of details. 
B) level of inherent risk. 
C) extent of tests of controls. 
D) level of detection risk. 
A) extent of substantive tests of details. 
B) level of inherent risk. 
C) extent of tests of controls. 
D) level of detection risk.

Question 10

Which of the following is not an input control activity?

Accepted Answer

A) Reasonableness tests 
B) Record counts 
C) Financial totals 
D) Hash totals 
A) Reasonableness tests 
B) Record counts 
C) Financial totals 
D) Hash totals

Question 11

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Accepted Answer

A) authorized. 
B) implemented. 
C) tested. 
D) monitored. 
A) authorized. 
B) implemented. 
C) tested. 
D) monitored.

Question 12

Which of the following is a factor in the control environment?

Accepted Answer

A) Segregation of duties 
B) Information processing 
C) Performance reviews 
D) Management's philosophy and operating style 
A) Segregation of duties 
B) Information processing 
C) Performance reviews 
D) Management's philosophy and operating style

Question 13

An audit team's responsibility would not include

Accepted Answer

A) designing client's internal controls. 
B) documentation of understanding of a client's internal controls. 
C) communicating internal control deficiencies. 
D) assessing the effectiveness a client's internal controls. 
A) designing client's internal controls. 
B) documentation of understanding of a client's internal controls. 
C) communicating internal control deficiencies. 
D) assessing the effectiveness a client's internal controls.

Question 14

Which of the following is the best way to compensate for the lack of adequate segregation of duties in a small organization?

Accepted Answer

A) Disclosing lack of segregation of duties to the external auditors during the annual review 
B) Replacing personnel every three or four years 
C) Requiring accountants to pass a yearly background check 
D) Allowing for greater management oversight of incompatible activities 
A) Disclosing lack of segregation of duties to the external auditors during the annual review 
B) Replacing personnel every three or four years 
C) Requiring accountants to pass a yearly background check 
D) Allowing for greater management oversight of incompatible activities

Question 15

In an audit of financial statements of a non-public company in accordance with generally accepted auditing standards,an auditor is required to

Accepted Answer

A) document the auditor's understanding of the entity's internal control. 
B) search for significant deficiencies in the operation of the internal controls. 
C) perform tests of controls to evaluate the effectiveness of the entity's accounting system. 
D) determine whether control activities are operating effectively to prevent or detect material misstatements. 
A) document the auditor's understanding of the entity's internal control. 
B) search for significant deficiencies in the operation of the internal controls. 
C) perform tests of controls to evaluate the effectiveness of the entity's accounting system. 
D) determine whether control activities are operating effectively to prevent or detect material misstatements.

Question 16

Regardless of the assessed level of control risk,an auditor of a non-public company would perform some

Accepted Answer

A) tests of controls to determine the effectiveness of internal control policies. 
B) analytical procedures to verify the design of internal control activities. 
C) substantive tests to restrict detection risk for significant transaction classes. 
D) dual purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk. 
A) tests of controls to determine the effectiveness of internal control policies. 
B) analytical procedures to verify the design of internal control activities. 
C) substantive tests to restrict detection risk for significant transaction classes. 
D) dual purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk.

Question 17

What are some of the problems in establishing an internal control system in small business?
A.Separation of functional responsibilities would be difficult because of the small number of employees.
B.The owner manager has to assume a greater role to oversee and supervise authorization,recordkeeping,and custodial functions.
C.The owner manager must be diligent,competent,and have a high degree of integrity.

Accepted Answer

Internal control problems in small busin

Question 18

When an auditor plans to rely on controls that have changed since they were last tested,which of the following courses of action would be most appropriate?

Accepted Answer

A) Test the operating effectiveness of such controls in the current audit. 
B) Document that reliance and proceed with the original audit strategy. 
C) Inquire of management as to the effectiveness of the controls. 
D) Report the reliance in the report on internal controls. 
A) Test the operating effectiveness of such controls in the current audit. 
B) Document that reliance and proceed with the original audit strategy. 
C) Inquire of management as to the effectiveness of the controls. 
D) Report the reliance in the report on internal controls.

Question 19

Which of the following statements best describes why an auditor would use only substantive procedures to evaluate specific relevant assertions and risks?

Accepted Answer

A) The relevant internal control components are not well documented. 
B) The internal auditor already has tested the relevant controls and found them effective. 
C) Testing the operating effectiveness of the relevant controls would not be efficient. 
D) The cost of substantive procedures will exceed the cost of testing the relevant controls. 
A) The relevant internal control components are not well documented. 
B) The internal auditor already has tested the relevant controls and found them effective. 
C) Testing the operating effectiveness of the relevant controls would not be efficient. 
D) The cost of substantive procedures will exceed the cost of testing the relevant controls.

Question 20

In testing control activities,an auditor ordinarily selects from a variety of techniques,including

Accepted Answer

A) inquiry and analytical procedures. 
B) reperformance and observation. 
C) comparison and confirmation. 
D) inspection and verification. 
A) inquiry and analytical procedures. 
B) reperformance and observation. 
C) comparison and confirmation. 
D) inspection and verification.

Which of the following client internal control activities is not usually performed in the treasurer's department?

Which of the following is not an objective of internal controls over financial reporting as defined by the Sarbanes-Oxley Act?

A sales clerk enters a customer's six-number customer account.The computer program uses the first five numbers to calculate a sixth number.This resulting number is then compared to the sixth number entered by the sales clerk.This is an example of a

Control strengths and weaknesses should be documented in audit documentation,sometimes called

If a control total were to be computed on each of the following data items,which would best be identified as a hash total for a payroll IT application?

What is the difference between a significant deficiency and a material weakness?

In computer systems,the information technology general controls (ITGC)would not include

Which of the following factors is most likely to affect the extent of the documentation of the auditor's understanding of a client's system of internal controls?

When the audit team increases the planned assessed level of control risk because certain control activities were determined to be ineffective,the audit team would most likely increase the

Which of the following is not an input control activity?

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Which of the following is a factor in the control environment?

An audit team's responsibility would not include

Which of the following is the best way to compensate for the lack of adequate segregation of duties in a small organization?

In an audit of financial statements of a non-public company in accordance with generally accepted auditing standards,an auditor is required to

Regardless of the assessed level of control risk,an auditor of a non-public company would perform some

When an auditor plans to rely on controls that have changed since they were last tested,which of the following courses of action would be most appropriate?

Which of the following statements best describes why an auditor would use only substantive procedures to evaluate specific relevant assertions and risks?

In testing control activities,an auditor ordinarily selects from a variety of techniques,including

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 5: Risk Assessment: Internal Control Evaluation

Which of the following client internal control activities is not usually performed in the treasurer's department?

Which of the following is not an objective of internal controls over financial reporting as defined by the Sarbanes-Oxley Act?

A sales clerk enters a customer's six-number customer account.The computer program uses the first five numbers to calculate a sixth number.This resulting number is then compared to the sixth number entered by the sales clerk.This is an example of a

Control strengths and weaknesses should be documented in audit documentation,sometimes called

If a control total were to be computed on each of the following data items,which would best be identified as a hash total for a payroll IT application?

What is the difference between a significant deficiency and a material weakness?

In computer systems,the information technology general controls (ITGC)would not include

Which of the following factors is most likely to affect the extent of the documentation of the auditor's understanding of a client's system of internal controls?

When the audit team increases the planned assessed level of control risk because certain control activities were determined to be ineffective,the audit team would most likely increase the

Which of the following is not an input control activity?

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Which of the following is a factor in the control environment?

An audit team's responsibility would not include

Which of the following is the best way to compensate for the lack of adequate segregation of duties in a small organization?

In an audit of financial statements of a non-public company in accordance with generally accepted auditing standards,an auditor is required to

Regardless of the assessed level of control risk,an auditor of a non-public company would perform some

When an auditor plans to rely on controls that have changed since they were last tested,which of the following courses of action would be most appropriate?

Which of the following statements best describes why an auditor would use only substantive procedures to evaluate specific relevant assertions and risks?

In testing control activities,an auditor ordinarily selects from a variety of techniques,including

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters