Question 1

Significant deficiencies and material weaknesses in internal control of a public company must be reported in writing to which of the following?

Accepted Answer

A)   Public Company Accounting Oversight Board
B)   Members of management who are responsible for the related area of the company
C)   Audit committee of the company's board of directors and to management
D)   AICPA

Question 2

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.

Question 3

Before making the final assessment of internal control at the end of an integrated audit,the auditor must:

Accepted Answer

A)   
B)   
C)   
D)

Question 4

Match seven of the terms (a-i)with the definitions provided below (1-7):
a.Control environment
b.Control activities
c.Independent checks on performance
d.Internal control
e.Monitoring
f.Separation of duties
g.General authorization
h.Specific authorization
i.Risk assessment
________ 1.Management's ongoing and periodic assessment of the quality of internal control performance to determine that controls are operating as intended and are modified when needed.
________ 2.Company-wide policies for the approval of all transactions within stated limits.
________ 3.The actions,policies,and procedures that reflect the overall attitudes of top management,directors,and owners of an entity about internal control and its importance to the entity.
________ 4.Segregation of the following activities in an organization:
 custody of assets,accounting,authorization,and operational responsibility.
________ 5.Management's identification and analysis of risks relevant to the preparation of financial statements in accordance with an applicable accounting framework.
________ 6.Policies and procedures that help ensure that necessary actions are taken to address risks in the achievement of the entity's objectives.
________ 7.A process designed to provide reasonable assurance regarding the achievement of management's objectives in the following categories:
 (1)reliability of financial reporting,(2)effectiveness and efficiency of operations,and (3)compliance with applicable laws and regulations.

Accepted Answer

1.E
2.G
3....

Question 5

It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the:

Accepted Answer

A)   cost/benefit relationship of the system of internal control.
B)   achievement of the objectives of internal control.
C)   comparison of recorded accountability with assets.
D)   timing of the tests to be performed.

Question 6

The purpose of phase 3 in the "process for understanding internal control and assessing control risk" is to:

Accepted Answer

A)   design, perform and evaluate tests of controls.
B)   obtain and document an understanding of internal control design an operation.
C)   assess control risk.
D)   decide planned detection risk and substantive tests.

Question 7

The scope of the auditor's report on internal control is limited to obtaining reasonable assurance that significant weaknesses in internal control are identified.

Accepted Answer

A) True 
 B)False

Question 8

Once auditors determine that entity level controls are designed and placed in the operation they:

Accepted Answer

A)   make a preliminary assessment for each transaction-related audit objective for each major type of transaction.
B)   make a preliminary assessment of control risk.
C)   obtain an understanding of the design and implementation of internal control.
D)   prepare audit documentation in order to opine on the company's internal control system.

Question 9

How must significant deficiencies and material weaknesses be communicated to those charged with governance?

Accepted Answer

A)   Either oral or written communication is acceptable.
B)   Oral communication is required.
C)   Written communication is required.
D)   Written communication is required for material weaknesses, but oral communication is allowed for significant deficiencies.

Question 10

Controls that are applied throughout the accounting period must be tested both at an interim date and then again on the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following represents a correct statement regarding internal control testing?

Accepted Answer

A)   When auditors plan to use evidence about the operating effectiveness of internal control contained in prior audits, auditing standards require tests of the controls' effectiveness at least every other year.
B)   The greater the risk, the less audit evidence the auditor should obtain that controls are operating effectively.
C)   The auditor uses control risk assessment and results of tests of controls to determine planned detection risk and the related substantive tests for the financial statement audit.
D)   Testing of internal controls can only be performed by the auditor at the end of the fiscal year.

Question 12

Which of the following groups establishes and maintains the company's internal controls?

Accepted Answer

A)   Internal auditors
B)   Board of Directors
C)   Management
D)   Audit committee

Question 13

An auditor should consider two key issues when obtaining an understanding of a client's internal controls.These issues are:

Accepted Answer

A)   the effectiveness and efficiency of the controls.
B)   the frequency and effectiveness of the controls.
C)   the design and operating effectiveness of the controls.
D)   the implementation and operating effectiveness of the controls.

Question 14

Which of the following statements is most correct with respect to separation of duties?

Accepted Answer

A)   A person who has temporary or permanent custody of an asset should account for that asset.
B)   Employees who authorize transactions should not have custody of related assets.
C)   Employees who open cash receipts should record the amounts in the subsidiary ledgers.
D)   Employees who authorize transactions should have recording responsibility for these transactions.

Question 15

Management's identification and analysis of risk is an ongoing process and is a critical component of effective internal control.An important first step is for management to identify factors that may increase risk.Identify at least five factors,observable by management,which may lead to increased risk in a typical business organization.

Accepted Answer

There are many factors that may lead to ...

Question 16

To issue an unqualified opinion on internal control over financial reporting,there must be no identified material weaknesses and no restrictions on the scope of the audit.

Accepted Answer

A) True 
 B)False

Question 17

Narratives,flowcharts,and internal control questionnaires are three common methods of:

Accepted Answer

A)   testing the internal controls.
B)   documenting the auditor's understanding of internal controls.
C)   designing the audit manual and procedures.
D)   documenting the auditor's understanding of a client's organizational structure.

Question 18

The financial statements may not correctly reflect accounting frameworks such as GAAP or IFRS if the:

Accepted Answer

A)   controls affecting the reliability of financial reporting are inadequate.
B)   company's controls do not promote efficiency.
C)   company's controls do not promote effectiveness.
D)   company's controls do not promote compliance with applicable rules and regulations.

Question 19

The auditor must communicate:

Accepted Answer

A)   only material weaknesses in internal control to those charged with governance.
B)   both significant deficiencies and material weaknesses in internal control to those charged with governance.
C)   any significant deficiencies in internal control to those charged with governance using a management letter.
D)   issues regarding internal control to those charged with governance in writing within 90 days following the audit report release.

Question 20

List the three steps in management's assessment of risk and then list two of the categories of management assertions that must be satisfied during the risk assessment process.

Accepted Answer

The steps taken by management in the ris...

Exam 10: Considering Internal Control

The auditor must communicate:

Correct Answer
verified

To issue an unqualified opinion on internal control over financial reporting,there must be no identified material weaknesses and no restrictions on the scope of the audit.

Correct Answer
verified

Correct Answer
verified
There are many factors that may lead to ...
View Answer

The purpose of phase 3 in the "process for understanding internal control and assessing control risk" is to:

Correct Answer
verified

The scope of the auditor's report on internal control is limited to obtaining reasonable assurance that significant weaknesses in internal control are identified.

Correct Answer
verified

The financial statements may not correctly reflect accounting frameworks such as GAAP or IFRS if the:

Correct Answer
verified

Significant deficiencies and material weaknesses in internal control of a public company must be reported in writing to which of the following?

Correct Answer
verified

Once auditors determine that entity level controls are designed and placed in the operation they:

Correct Answer
verified

Narratives,flowcharts,and internal control questionnaires are three common methods of:

Correct Answer
verified

Which of the following represents a correct statement regarding internal control testing?

Correct Answer
verified

List the three steps in management's assessment of risk and then list two of the categories of management assertions that must be satisfied during the risk assessment process.

Correct Answer
verified
The steps taken by management in the ris...
View Answer

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:

Correct Answer
verified

Which of the following groups establishes and maintains the company's internal controls?

Correct Answer
verified

An auditor should consider two key issues when obtaining an understanding of a client's internal controls.These issues are:

Correct Answer
verified

Before making the final assessment of internal control at the end of an integrated audit,the auditor must:

Correct Answer
verified

Which of the following statements is most correct with respect to separation of duties?

Correct Answer
verified

How must significant deficiencies and material weaknesses be communicated to those charged with governance?

Correct Answer
verified

It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the:

Correct Answer
verified

Correct Answer
verified
1.E
2.G
3....
View Answer

Controls that are applied throughout the accounting period must be tested both at an interim date and then again on the balance sheet date.

Correct Answer
verified

Exam 10: Considering Internal Control

The auditor must communicate:

Correct AnswerverifiedShow Answer

To issue an unqualified opinion on internal control over financial reporting,there must be no identified material weaknesses and no restrictions on the scope of the audit.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThere are many factors that may lead to ...View AnswerShow Answer

The purpose of phase 3 in the "process for understanding internal control and assessing control risk" is to:

Correct AnswerverifiedShow Answer

The scope of the auditor's report on internal control is limited to obtaining reasonable assurance that significant weaknesses in internal control are identified.

Correct AnswerverifiedShow Answer

The financial statements may not correctly reflect accounting frameworks such as GAAP or IFRS if the:

Correct AnswerverifiedShow Answer

Significant deficiencies and material weaknesses in internal control of a public company must be reported in writing to which of the following?

Correct AnswerverifiedShow Answer

Once auditors determine that entity level controls are designed and placed in the operation they:

Correct AnswerverifiedShow Answer

Narratives,flowcharts,and internal control questionnaires are three common methods of:

Correct AnswerverifiedShow Answer

Which of the following represents a correct statement regarding internal control testing?

Correct AnswerverifiedShow Answer

List the three steps in management's assessment of risk and then list two of the categories of management assertions that must be satisfied during the risk assessment process.

Correct AnswerverifiedThe steps taken by management in the ris...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

Which of the following groups establishes and maintains the company's internal controls?

Correct AnswerverifiedShow Answer

An auditor should consider two key issues when obtaining an understanding of a client's internal controls.These issues are:

Correct AnswerverifiedShow Answer

Before making the final assessment of internal control at the end of an integrated audit,the auditor must:

Correct AnswerverifiedShow Answer

Which of the following statements is most correct with respect to separation of duties?

Correct AnswerverifiedShow Answer

How must significant deficiencies and material weaknesses be communicated to those charged with governance?

Correct AnswerverifiedShow Answer

It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the:

Correct AnswerverifiedShow Answer

Correct Answerverified1.E2.G3....View AnswerShow Answer

Controls that are applied throughout the accounting period must be tested both at an interim date and then again on the balance sheet date.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
verified
There are many factors that may lead to ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The steps taken by management in the ris...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1.E
2.G
3....
View Answer

Correct Answer
verified