Question 1

In the consideration of internal control, the auditor is basically concerned that it provides reasonable assurance that:

Accepted Answer

A)  Management cannot override the system. 
B)  Operational efficiency has been achieved in accordance with management plans. 
C)  Misstatements have been prevented or detected. 
D)  Controls have not been circumvented by collusion. 
A)  Management cannot override the system. 
B)  Operational efficiency has been achieved in accordance with management plans. 
C)  Misstatements have been prevented or detected. 
D)  Controls have not been circumvented by collusion.

Question 2

The external auditors might consider the procedures performed by the internal auditors because:

Accepted Answer

A)  They are employees whose work must be reviewed during substantive testing. 
B)  They are employees whose work might affect the external auditors' work. 
C)  Their work impacts upon the cost/benefit tradeoff in evaluating inherent limitations. 
D)  Their degree of independence may be inferred by the nature of their work. 
A)  They are employees whose work must be reviewed during substantive testing. 
B)  They are employees whose work might affect the external auditors' work. 
C)  Their work impacts upon the cost/benefit tradeoff in evaluating inherent limitations. 
D)  Their degree of independence may be inferred by the nature of their work.

Question 3

If the auditors' assessment of the design of internal control reveals that it cannot be relied upon, the auditors are not required to prepare any documentation of internal control for their working papers.

Accepted Answer

A) True 
 B)False

Question 4

The definition of internal control developed by the Committee of Sponsoring Organizations (COSO) includes controls related to the reliability of internal and external reporting, the effectiveness and efficiency of operations, and:

Accepted Answer

A)  Compliance with applicable laws and regulations. 
B)  Effectiveness of prevention of fraudulent occurrences. 
C)  Safeguarding of entity equity. 
D)  Incorporation of ethical business practice standards. 
A)  Compliance with applicable laws and regulations. 
B)  Effectiveness of prevention of fraudulent occurrences. 
C)  Safeguarding of entity equity. 
D)  Incorporation of ethical business practice standards.

Question 5

In assessing the objectivity of a client's internal auditors, the CPA would be most likely to consider internal auditor's:

Accepted Answer

A)  Education levels. 
B)  Experience. 
C)  Organizational status within the company. 
D)  Training and supervisory skills. 
A)  Education levels. 
B)  Experience. 
C)  Organizational status within the company. 
D)  Training and supervisory skills.

Question 6

When tests of controls reveal that controls are operating as anticipated, it is most likely that the assessed level of control risk will:

Accepted Answer

A)  Be less than the preliminary assessed level of control risk. 
B)  Equal the preliminary assessed level of control risk. 
C)  Equal the actual control risk. 
D)  Be less than the actual control risk. 
A)  Be less than the preliminary assessed level of control risk. 
B)  Equal the preliminary assessed level of control risk. 
C)  Equal the actual control risk. 
D)  Be less than the actual control risk.

Question 7

Which of the following is intended to detect deviations from prescribed controls?

Accepted Answer

A)  Substantive procedures specified by a standardized audit plan. 
B)  Tests of controls designed specifically for the client. 
C)  Analytical procedures as set forth in an industry audit guide. 
D)  Computerized analytical procedures tailored for the configuration of the computer equipment in use. 
A)  Substantive procedures specified by a standardized audit plan. 
B)  Tests of controls designed specifically for the client. 
C)  Analytical procedures as set forth in an industry audit guide. 
D)  Computerized analytical procedures tailored for the configuration of the computer equipment in use.

Question 8

Which statement is correct concerning the relevance of various types of controls to a financial statement audit?

Accepted Answer

A)  An auditor may ordinarily ignore the consideration of controls when a substantive audit approach is used. 
B)  Controls over the reliability of financial reporting are ordinarily most directly relevant to an audit, but other controls may also be relevant. 
C)  Controls over safeguarding assets and liabilities are of primary importance, while controls over the reliability of financial reporting may also be relevant. 
D)  All controls are ordinarily relevant to an audit. 
A)  An auditor may ordinarily ignore the consideration of controls when a substantive audit approach is used. 
B)  Controls over the reliability of financial reporting are ordinarily most directly relevant to an audit, but other controls may also be relevant. 
C)  Controls over safeguarding assets and liabilities are of primary importance, while controls over the reliability of financial reporting may also be relevant. 
D)  All controls are ordinarily relevant to an audit.

Question 9

After considering the client's internal control, the auditors have concluded that it is well-designed and is functioning as anticipated. Under these circumstances, the auditors would most likely:

Accepted Answer

A)  Cease to perform further substantive procedures. 
B)  Reduce substantive procedures in areas where the internal control was found to be effective. 
C)  Increase the extent of anticipated analytical procedures. 
D)  Perform all tests of controls to the extent outlined in the preplanned audit plan. 
A)  Cease to perform further substantive procedures. 
B)  Reduce substantive procedures in areas where the internal control was found to be effective. 
C)  Increase the extent of anticipated analytical procedures. 
D)  Perform all tests of controls to the extent outlined in the preplanned audit plan.

Question 10

Which of the following factors would most likely be considered an inherent limitation to an entity's internal control?

Accepted Answer

A)  The complexity of the information processing system. 
B)  Human judgment in the decision making process. 
C)  The ineffectiveness of the board of directors. 
D)  The lack of management incentives to improve the control environment. 
A)  The complexity of the information processing system. 
B)  Human judgment in the decision making process. 
C)  The ineffectiveness of the board of directors. 
D)  The lack of management incentives to improve the control environment.

Question 11

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 12

Which of the following is most likely to be considered a risk assessment procedure relating to internal control?

Accepted Answer

A)  Confirm accounts receivable. 
B)  Perform a test of a control relating to payroll. 
C)  Take test counts of the year-end inventory. 
D)  Trace a transaction through the information system relevant to financial reporting. 
A)  Confirm accounts receivable. 
B)  Perform a test of a control relating to payroll. 
C)  Take test counts of the year-end inventory. 
D)  Trace a transaction through the information system relevant to financial reporting.

In the consideration of internal control, the auditor is basically concerned that it provides reasonable assurance that:

The external auditors might consider the procedures performed by the internal auditors because:

If the auditors' assessment of the design of internal control reveals that it cannot be relied upon, the auditors are not required to prepare any documentation of internal control for their working papers.

The definition of internal control developed by the Committee of Sponsoring Organizations (COSO) includes controls related to the reliability of internal and external reporting, the effectiveness and efficiency of operations, and:

In assessing the objectivity of a client's internal auditors, the CPA would be most likely to consider internal auditor's:

When tests of controls reveal that controls are operating as anticipated, it is most likely that the assessed level of control risk will:

Which of the following is intended to detect deviations from prescribed controls?

Which statement is correct concerning the relevance of various types of controls to a financial statement audit?

After considering the client's internal control, the auditors have concluded that it is well-designed and is functioning as anticipated. Under these circumstances, the auditors would most likely:

Which of the following factors would most likely be considered an inherent limitation to an entity's internal control?

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

Which of the following is most likely to be considered a risk assessment procedure relating to internal control?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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 Report

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

In the consideration of internal control, the auditor is basically concerned that it provides reasonable assurance that:

The external auditors might consider the procedures performed by the internal auditors because:

If the auditors' assessment of the design of internal control reveals that it cannot be relied upon, the auditors are not required to prepare any documentation of internal control for their working papers.

The definition of internal control developed by the Committee of Sponsoring Organizations (COSO) includes controls related to the reliability of internal and external reporting, the effectiveness and efficiency of operations, and:

In assessing the objectivity of a client's internal auditors, the CPA would be most likely to consider internal auditor's:

When tests of controls reveal that controls are operating as anticipated, it is most likely that the assessed level of control risk will:

Which of the following is intended to detect deviations from prescribed controls?

Which statement is correct concerning the relevance of various types of controls to a financial statement audit?

After considering the client's internal control, the auditors have concluded that it is well-designed and is functioning as anticipated. Under these circumstances, the auditors would most likely:

Which of the following factors would most likely be considered an inherent limitation to an entity's internal control?

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

Which of the following is most likely to be considered a risk assessment procedure relating to internal control?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

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 Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters