Question 1

After obtaining an understanding of internal controls and assessing control risk on the audit of a non-public company,an auditor decided to perform tests of controls.The auditor most likely decided that

Accepted Answer

A)  it would be efficient to perform tests of controls that would result in a reduction in planned substantive tests.
B)  additional evidence to support a further reduction in control risk is not available.
C)  an increase in the assessed level of control risk is justified for certain financial statement assertions.
D)  there were many internal control weaknesses that could allow errors to enter the accounting system.E) B) and C)
F) A) and B)

Question 2

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Accepted Answer

A)  Apply analytical procedures to both financial data and nonfinancial information to detect conditions that may indicate weak controls.
B)  Perform tests of details of transactions and account balances to identify potential errors and fraud.
C)  Identify specific internal control policies and activities that are likely to detect or prevent material misstatements.
D)  Document that the additional audit effort to perform tests of controls exceeds the potential reduction in substantive testing.E) B) and C)
F) A) and C)

Question 3

The internal control in small business is highly dependent on the

Accepted Answer

A)  separation of functional responsibilities.
B)  complexity of the client's internal controls.
C)  owner-manager's competence,as well as his/her ethics and integrity.
D)  bonding of employees.E) All of the above
F) B) and D)

Question 4

Which of the following audit procedures most likely would provide an auditor with the most assurance about the effectiveness of the operation of an entity's internal control?

Accepted Answer

A)  Confirmation with outside parties
B)  Inquiry of client personnel
C)  Successful re-performance of the control activity
D)  Observation of client personnelE) C) and D)
F) All of the above C

Question 5

Sound internal control can be described as separating all of the following duties and responsibilities except for

Accepted Answer

A)  transaction authorization.
B)  recordkeeping.
C)  custody of,or direct access to,assets.
D)  hiring of employees.E) All of the above
F) A) and B)

Question 6

Control activities intended to ensure that transactions are recorded in the right period are designed to achieve the ASB assertion of

Accepted Answer

A)  occurrence.
B)  accuracy.
C)  valuation or allocation.
D)  cutoff.E) None of the above
F) All of the above

Question 7

Which of the following is not a component of internal controls?

Accepted Answer

A)  Control environment
B)  Control activities
C)  Inherent risk
D)  MonitoringE) None of the above
F) All of the above

Question 8

Which of the following areas can external auditors rely on internal auditors' work in auditing internal controls?

Accepted Answer

A)  Evaluation of the auditing environment
B)  Testing of low risk internal control activities
C)  All testing of the operating effectiveness of internal control activities
D)  As providing the principle evidence for the external auditors' opinionE) C) and D)
F) None of the above

Question 9

Generally accepted auditing standards (GAAS) give auditors considerable discretion to decide the amount of work required to satisfy auditing standards guiding internal control evaluation and related audit planning.Which of the descriptions below best expresses the minimum amount of work permitted by GAAS for nonpublic companies?

Accepted Answer

A)  Do not obtain an understanding of client environment,accounting,or control activities.Do not document the decision to assess control risk at maximum.Perform 100% substantive audit on all financial statement transactions and balances.
B)  Obtain an understanding of client environment,accounting,and control activities.Document the decision to assess control risk at maximum.Perform an extensive but not 100% substantive audit on financial statement transactions and balances.
C)  Obtain an understanding of client environment,accounting,and control activities,and perform detail tests of controls.Document the decision to assess control risk below the maximum.Perform restricted substantive audit on financial statement transactions and balances,considering the control risk assessment.
D)  Obtain an understanding of client environment,accounting,and control activities,and perform detail tests of controls.Document the decision to assess control risk at zero.Perform no substantive audit on financial statement transactions and balances,since zero control risk means that no errors or fraud can reach the accounts.E) B) and C)
F) B) and D)

Question 10

Which of the following should an auditor do when control risk is assessed at the maximum level?

Accepted Answer

A)  Perform fewer substantive tests of details
B)  Perform more tests of controls
C)  Document the assessment
D)  Document the control structure more extensivelyE) A) and D)
F) B) and D)

Question 11

Below are several of the ASB management assertions.
A.Occurrence
B.Completeness
C.Rights and obligations
D.Allocation or valuation
E.Classification

Accepted Answer

The answer of Below are several of the ASB management...

Question 12

If auditors assess control risk at the maximum level,they will tend to

Accepted Answer

A)  perform a great deal of additional tests of controls.
B)  perform a great deal of substantive testing during the audit.
C)  perform substantive tests at an interim date.
D)  perform more audit procedures using internal evidence.E) A) and C)
F) B) and C)

Question 13

An auditor is concerned about a policy of management override as a limitation of internal control.Which of the following tests would best assess the validity of the auditor's concern?

Accepted Answer

A)  Matching purchase orders to accounts payable
B)  Verifying that approved spending limits are not exceeded
C)  Tracing sales orders to the revenue account
D)  Reviewing minutes of board meetingE) A) and D)
F) None of the above

Question 14

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

Accepted Answer

A)  factors that raise doubts about the auditability of the financial statements.
B)  operating effectiveness of internal control policies and procedures.
C)  risk that material misstatements exist in the financial statements.
D)  possibility that the nature and extent of substantive tests may be reduced.E) A) and C)
F) None of the above

Question 15

List several elements of a company's control environment.

Accepted Answer

Some of the elements of a control enviro...

Question 16

After obtaining an understanding of the entity's internal control and assessing control risk,an auditor of a non-public company decided not to perform additional tests of controls.The auditor most likely concluded that the

Accepted Answer

A)  additional evidence to support a further reduction in control risk was not cost beneficial.
B)  assessed level of inherent risk exceeded the assessed level of control risk.
C)  internal control structure was properly designed and justifiably may be relied on.
D)  evidence obtainable through tests of controls would not support an increased level of control risk.E) All of the above
F) C) and D) A

Question 17

Which of the following outcomes is a likely benefit of information technology used for internal control?

Accepted Answer

A)  Processing of unusual or nonrecurring transactions
B)  Enhanced timeliness of information
C)  Potential loss of data
D)  Recording of unauthorized transactionsE) C) and D)
F) B) and D)

Question 18

Which of the following payroll control activities would most effectively ensure that payment is made only for work performed?

Accepted Answer

A)  Require all employees to record arrival and departure by using the time clock.
B)  Have a payroll clerk recalculate all time cards.
C)  Require all employees to sign their time cards.
D)  Require employees to have their direct supervisors approve their time cards.E) B) and D)
F) None of the above D

Question 19

Which of the following activities performed by a department supervisor most likely would help in the prevention or detection of a payroll fraud?

Accepted Answer

A)  Distributing paychecks directly to department store employees
B)  Setting the pay rate for departmental employees
C)  Hiring employees and authorizing them to be added to payroll
D)  Approving a summary of hours each employee worked during the pay periodE) C) and D)
F) None of the above

Question 20

Which of the following is an Information Technology General Control?

Accepted Answer

A)  Check digit
B)  Run-to-run totals
C)  Distribution of computerized output
D)  Separation of duties in the IT departmentE) B) and C)
F) A) and B)

Exam 5: Risk Assessment: Internal Control Evaluation

After obtaining an understanding of internal controls and assessing control risk on the audit of a non-public company,an auditor decided to perform tests of controls.The auditor most likely decided that

Correct Answer
verified

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Correct Answer
verified

The internal control in small business is highly dependent on the

Correct Answer
verified

Which of the following audit procedures most likely would provide an auditor with the most assurance about the effectiveness of the operation of an entity's internal control?

Correct Answer
verified
C

Sound internal control can be described as separating all of the following duties and responsibilities except for

Correct Answer
verified

Control activities intended to ensure that transactions are recorded in the right period are designed to achieve the ASB assertion of

Correct Answer
verified

Which of the following is not a component of internal controls?

Correct Answer
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Which of the following areas can external auditors rely on internal auditors' work in auditing internal controls?

Correct Answer
verified

Correct Answer
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Which of the following should an auditor do when control risk is assessed at the maximum level?

Correct Answer
verified

Below are several of the ASB management assertions. A.Occurrence B.Completeness C.Rights and obligations D.Allocation or valuation E.Classification

Correct Answer
verified

If auditors assess control risk at the maximum level,they will tend to

Correct Answer
verified

An auditor is concerned about a policy of management override as a limitation of internal control.Which of the following tests would best assess the validity of the auditor's concern?

Correct Answer
verified

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

Correct Answer
verified

List several elements of a company's control environment.

Correct Answer
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Some of the elements of a control enviro...
View Answer

After obtaining an understanding of the entity's internal control and assessing control risk,an auditor of a non-public company decided not to perform additional tests of controls.The auditor most likely concluded that the

Correct Answer
verified
A

Which of the following outcomes is a likely benefit of information technology used for internal control?

Correct Answer
verified

Which of the following payroll control activities would most effectively ensure that payment is made only for work performed?

Correct Answer
verified
D

Which of the following activities performed by a department supervisor most likely would help in the prevention or detection of a payroll fraud?

Correct Answer
verified

Which of the following is an Information Technology General Control?

Correct Answer
verified

Exam 5: Risk Assessment: Internal Control Evaluation

After obtaining an understanding of internal controls and assessing control risk on the audit of a non-public company,an auditor decided to perform tests of controls.The auditor most likely decided that

Correct AnswerverifiedShow Answer

Which of the following is a step in an auditor's decision to assess control risk at below the maximum?

Correct AnswerverifiedShow Answer

The internal control in small business is highly dependent on the

Correct AnswerverifiedShow Answer

Which of the following audit procedures most likely would provide an auditor with the most assurance about the effectiveness of the operation of an entity's internal control?

Correct AnswerverifiedC

Sound internal control can be described as separating all of the following duties and responsibilities except for

Correct AnswerverifiedShow Answer

Control activities intended to ensure that transactions are recorded in the right period are designed to achieve the ASB assertion of

Correct AnswerverifiedShow Answer

Which of the following is not a component of internal controls?

Correct AnswerverifiedShow Answer

Which of the following areas can external auditors rely on internal auditors' work in auditing internal controls?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following should an auditor do when control risk is assessed at the maximum level?

Correct AnswerverifiedShow Answer

Below are several of the ASB management assertions. A.Occurrence B.Completeness C.Rights and obligations D.Allocation or valuation E.Classification

Correct AnswerverifiedShow Answer

If auditors assess control risk at the maximum level,they will tend to

Correct AnswerverifiedShow Answer

An auditor is concerned about a policy of management override as a limitation of internal control.Which of the following tests would best assess the validity of the auditor's concern?

Correct AnswerverifiedShow Answer

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the

Correct AnswerverifiedShow Answer

List several elements of a company's control environment.

Correct AnswerverifiedSome of the elements of a control enviro...View AnswerShow Answer

After obtaining an understanding of the entity's internal control and assessing control risk,an auditor of a non-public company decided not to perform additional tests of controls.The auditor most likely concluded that the

Correct AnswerverifiedA

Which of the following outcomes is a likely benefit of information technology used for internal control?

Correct AnswerverifiedShow Answer

Which of the following payroll control activities would most effectively ensure that payment is made only for work performed?

Correct AnswerverifiedD

Which of the following activities performed by a department supervisor most likely would help in the prevention or detection of a payroll fraud?

Correct AnswerverifiedShow Answer

Which of the following is an Information Technology General Control?

Correct AnswerverifiedShow Answer

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C

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Some of the elements of a control enviro...
View Answer

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A

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D

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