Exam 18: Integrated Audits of Public Companies

Which of the following must be included in management's report internal control under section 404 of the Sarbanes-Oxley Act of 2002?

An auditor's report on internal control ordinarily includes negative assurance on the effectiveness of internal control.

A material weakness involves a reasonable possibility that what size misstatement will not be prevented or detected?

Assume that an auditor is focusing on two weaknesses in internal control. Although neither is by itself a material weakness, the two significant deficiencies in combination represent a material weakness. The client effectively remediates one of them prior to year-end but does not have time to remediate the other prior to year-end. What type of audit report on internal control is appropriate?

Which must management communicate to the audit committee? Known Material Weaknesses Known Significant Deficiencies A. Yes Yes B. Yes No C. No Yes D. No No

Based on PCAOB standards for an internal control audit, which of the following is least likely to indicate a significant deficiency relating to a client's antifraud programs?

According to PCAOB standards, determining the allowance for doubtful accounts is referred to as a(n):

PCAOB standards suggest that auditors emphasize nonroutine transactions as contrasted to routine transactions in their consideration of internal control.

An audit firm has been engaged to report on whether a material weakness that previously resulted in an adverse opinion on internal control has been remediated. Which of the following statements is correct?

An auditor identified a material weakness in internal control in December. The client was informed and the client corrected the material weakness shortly after year-end (December 31); the auditor agrees that the correction eliminated the material weakness as of January 31. The appropriate audit report on internal control under PCAOB standards on reporting on internal control is:

Consider a company whose sales are initiated by customers either through the Internet or in a retail store. Which of the following is correct?

An auditor identified a material weakness in internal control in August. The client was informed and the client corrected the material weakness prior to year-end (December 31); the auditor agrees that the correction eliminated the material weakness prior to year-end. The appropriate audit report on internal control under PCAOB standards on reporting on internal control is:

Tests of operating effectiveness ordinarily include reperformance of the application of controls.

A material weakness that exists at year-end will result in what type of audit report on internal control?

The amount involved with a significant deficiency is at least a material amount.

Walk-throughs provide evidence that helps the auditor to: Evaluate chesign effectiveness of controls Confirm whether controls have been placed in operation A. Yes Yes B. Yes No C. No Yes D. No No

The minimum likelihood of loss involved in the consideration of a possible significant deficiency is:

The framework most likely to be used by the client in its internal control assessment is the:

Section 404 of the Sarbanes-Oxley Act of 2002 includes internal control reporting requirements for both management and auditors.

Deficiencies in internal control identified by the auditor that are lesser than significant deficiencies: