1.
The primary primary respo responsib nsibilit ility y for establ establishi ishing ng and mainta maintainin ining g an internal internal contr control ol rests rests with a. The The exter externa nal l audi audito tors rs b. The The inter interna nal l audi audito tors rs c. Manageme Management nt and those those charg charged ed with with governan governance ce d. The cont control rolle ler r or the the treas treasure urer r
2.
The fundam fundamenta ental l purpose purpose of of an interna internal l control control is to to a. Safeguar Safeguard d the resou resources rces of the the organiz organizatio ation n b. Provide reasonable reasonable assurance that the objectives objectives of the organizatio organization n are achieved achieved c. Encourag Encourage e complianc compliance e with organiz organizatio ation n objective objectives s d. Ensure the accuracy accuracy reliability reliability and and timeliness timeliness of information information
!.
"hich "hich of the following following is not one of the three primary primary objecti objectives ves of effectiv effective e internal internal control# a. $eliabil $eliability ity of financia financial l repor reporting ting b. Efficien Efficiency cy and and effecti effectivene veness ss of operatio operations ns c. %omplian %ompliance ce with with laws and regulati regulations ons d. Assuranc Assurance e of elimin eliminatio ation n of busin business ess risk risk
&.
"hich of the following following internal internal control control objectives objectives would be most relevant relevant to the audit# audit# a. 'pera 'peratio tional nal object objective ive b. %ompl %omplian iance ce objec objectiv tive e c. Finan Financia cial l report reporting ing obje objecti ctive ve d. (dminist (dministrati rative ve control control objectiv objective e
).
"hich "hich statement statement is correct correct concernin concerning g the relevance relevance of various various types of controls controls to a financial audit# a. (n auditor auditor may ordinarily ordinarily ignore ignore a considerat consideration ion of controls controls when a substantiv substantive e audit approach is ta*en b. Controls over the reliability of financial reporting are ordinarily most directly relevant to an audit but other controls may also be relevant c. %ontrols %ontrols over over safeguardi safeguarding ng of assets and liabiliti liabilities es are of primary primary importan importance ce while controls over the reliability of financial reporting may also be relevant d. (ll contro controls ls are ordin ordinaril arily y relevant relevant to to an audit. audit.
+.
(n auditor auditor would would most most li*ely li*ely be concern concerned ed with inter internal nal contro control l policies policies and and procedure procedures s that provide reasonable assurance about the a. Efficien Efficiency cy of managemen management,s t,s decision decision-ma* -ma*ing ing process process b. (ppropri (ppropriate ate prices prices the entity entity should should charge charge for for its products products c. ethods ethods of assign assigning ing produc production tion tas*s tas*s to employ employees ees d. ntity!s ntity!s abilit ability y to process process and summari summarize ze financia financial l data
/.
0n an audit audit of financ financial ial stateme statement nts s an audit auditor or,s ,s prima primary ry internal control activity is whether the control a. $eflects $eflects manage management ment,s ,s philosop philosophy hy and operati operating ng style style b. Affects management! management!s s financial financial statement statement assertion assertion c. rovides rovides adeu adeuate ate safegu safeguards ards over over access access to assets assets d. Enhances Enhances manage management ment,s ,s decision decision-ma* -ma*ing ing process process
3.
Two *ey concepts concepts that that underlie underlie management,s management,s design design and implementation implementation of internal internal control control are4 a. Costs Costs and and materi materiali ality ty b. (bsol (bsolute ute assu assuran rance ce and and costs costs c. 0nherent 0nherent limit limitatio ations ns and reason reasonable able assur assurance ance d. %ollu %ollusio sion n and and mater material ialit ity y
5.
0ntern 0nternal al contr control ol can provid provide e only only reaso reasona nable ble assura assuranc nce e of achiev achieving ing entity entity,s ,s contro control l objectives. 'ne factor limiting the li*elihood of achieving those objectives is that a. The auditor,s auditor,s primary responsibility responsibility is the detection of fraud fraud b. The board board of director directors s is active active and and independ independent ent c. "he cost cost of internal internal contro control l should should not e#ceed e#ceed its benef benefits its d. anageme anagement nt monit monitors ors internal internal control control
consi conside derat ration ion regardi regarding ng
an
16. (n act of two or more employees employees to steal assets assets and cover their theft by misstatin misstating g the accounting records would be referred to as4 a. Collusion b. ( mate materi rial al wea wea*n *nes ess s c. ( cont contro rol l defi defici cien ency cy d. ( signi signific ficant ant defic deficien iency cy
11. 0nherent limitations in an internal control must be considered in evaluating its effectiveness in preventing and detecting errors and fraud. 0nherent limitations do not include a. isunderstanding of instructions mista*es of judgment personal carelessness distraction or fatigue. b. $ncompatible functions performed by the same person. c. %ollusion among employees. d. anagement override of certain policies or procedures. 12. "hich of the following best describes an inherent limitation that should be recognized by an auditor when considering the potential effectiveness of an internal control structure# a. Procedures whose effectiveness depends on segregation of duties can be circumvented by collusion. b. The competence and integrity of client personnel provide an environment conducive to control and provides assurance that effective control will be achieved. c. rocedures designed to assure the execution and recording of transactions in accordance with proper authorizations are effective against fraud perpetrated by management. d. The benefits expected to be derived from effective internal control usually do not exceed the cost of such control. 1!. "hen considering the effectiveness of a system of internal control the auditor should recognize that inherent limitations do exist. "hich of the following is an example of an inherent limitation in a system of internal accounting control# a. The effectiveness of procedures depends on the segregation of employee duties. b. rocedures are designed to assure the execution and recording of transactions in accordance with management,s authorization. c. $n the performance of most control procedures% there are possibilities of errors arising from mistakes in judgment. d. rocedures for handling large numbers of transactions are processed by electronic data processing euipment. 1&. (n effective system of internal control a. %annot be circumvented by management b. Can reduce the cost of an e#ternal audit c. %an prevent collusion among employees d. Eliminates ris*s and potential loss to the organization 1). 0nternal controls are not designed to provide reasonable assurance that4 a. All frauds will be detected b. Transactions are executed in accordance with management,s authorization c. (ccess to assets is permitted only in accordance with management,s authorization d. %ompany personnel comply with applicable rules and regulations 1+. The internal control cannot be designed to provide reasonable assurance that4 a. Transactions are executed in accordance with management,s authorization b. Fraud will be eliminated c. (ccess to assets is permitted only in accordance with management,s authorization d. The recorded accountability for assets is compared with the existing assets at reasonable intervals 1/. "hich of the following statements about internal control is correct# a. roperly maintained internal control reasonably ensures that collusion among employees cannot occur. b. T he e sta bl ish men t an d ma int en anc e of i nt ern al c ont rol are imp ort an t responsibilities of the internal auditor. c. Exceptionally strong internal control is enough for the auditor to eliminate substantive tests on a significant account balance. d. "he cost&benefit relationship is a primary criterion that should be considered in designing internal control. 13. "hich of the following is correct about internal control# a. (ccounting and internal control systems provide management with conclusive evidence that objectives are reached. b. 'ne of the inherent limitations of accounting and internal control systems is the possibility that the procedures may become inade(uate due to changes in conditions% and compliance with procedures may deteriorate. c. ost internal controls tend to be directed at non-routine transactions. d. anagement does not consider costs of the accounting and internal control systems.
15. 0nternal control no matter how well designed and operated can only provide an entity with reasonable assurance about achieving the entity,s objectives. The li*elihood of achievement is affected by limitations inherent to internal control. These limitations don not include4 a. %ollusion among employees b. 0nappropriate management override of internal control c. 7uman failures d. $ncompatible functions 26. 0nternal controls can never be regarded as completely effective. Even if company personnel could design an ideal system its effectiveness depends on the4 a. (deuacy of the computer system b. roper implementation by management c. (bility of the internal audit staff to maintain it d. Competency and dependability of the people using it 21. "hich of the following best describes the interrelated components of internal control# a. 'rganizational structure management philosophy and planning b. Control environment% risk assessment% control activities% information and communication systems% and monitoring c. $is* assessment bac* up facilities responsibility accounting and natural laws. d. 0nternal audit and management,s philosophy and operating style. 22. "hich of the following is not one of the components of an entity,s internal control# a. % on tro l r is * b. Control activities c. 0nformation and communication d. The control environment 2!. The overall attitude and awareness of an entity,s board of directors concerning the importance of the internal control usually is reflected in its a. %omputer-based controls b. System of segregation of duties c. Control environment d. Safeguards over access to assets 2&. "hen obtaining 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 a. The auditor may believe that the policies and procedures are inappropriate for that particular entity b. The board of directors may not be aware of management,s attitude toward the control environment c. Management environment may establish appropriate policies and procedures but not act on them d. The policies and procedures may be so ineffective that the auditor may assess control ris* at a high level 2). 8asic to a proper control environment are the uality and integrity of personnel who must perform the prescribed procedures. "hich is not a factor in providing for competent personnel# a. )egregation of duties b. 7iring practices c. Training programs d. erformance evaluations 2+. 0n evaluating the design of the entity,s internal control environment the auditor considers the certain subcomponents of control environment and how they have been incorporated into the entity,s processes. Subcomponents of control environment would not include a. 0ntegrity and ethical values b. %ommitment to competence c. 'rganizational structure d. $nformation and communications system 2/. 0t is important for the auditor to consider the competence of the audit employees because their competence bears directly and importantly upon the a. %ost-benefit relationship of internal control b. Achievement of the objectives of internal control c. %omparison of recorded accountability with assets d. Timing of the tests to be performed
client,s
23. "hich of the following components of an entity,s internal control structure includes the development of employee promotion and training policies# a. %ontrol activities b. Control environment c. 0nformation and communication d. 9uality and control system
*+. "hich of the following subcomponents of the control environment define the existing lines of responsibility and authority# a. 'rganizational structure b. anagement philosophy and operating style c. 7uman resource policies and practices d. anagement integrity and ethical value !6. "hich of the following is not one of the subcomponents of the control environment# a. anagement,s philosophy and operating style b. 'rganizational structure c. Ade(uate separation of duties d. %ommitment to competence !1. anagement philosophy and operating style most li*ely would have a significant influence on an entity,s control environment when a. The internal auditor reports directly to management. b. Management is dominated by one individual c. (ccurate management job descriptions delineate specific duties. d. The audit committee actively oversees the financial reporting process. !2. ( proper segregation of duties reuires a. (n individual authorizing a transaction records it b. (n individual authorizing a transaction maintains a custody of the asset that resulted from the transaction. c. (n individual maintaining custody of an asset be entitled to access the accounting records for the asset d. An individual recording a transaction not compare the accounting record of the asset with the asset itself !!. The single most effective control procedure established to avoid allowing any person to be in a position to perpetrate and then conceal errors or fraud is a. "he separation of the functional responsibilities custodianship% record keeping% operation% and authorization. b. $euire each employee to ta*e a vacation each year c. Establish an internal audit department d. $euire the bonding of personnel in positions that necessitate handling of cash and other universally desirable valuables !&. "hich of the following statements is most correct with respect to separation of duties# a. Employees should not have temporary and permanent custody of assets b. Employees who authorize transactions should not have custody of related assets c. 0t is permissible to allow an employee to open cash receipts and record those receipts. d. mployees who authorize transactions should have recording responsibility for these transactions. !). "hich of the following would contribute most to the safeguarding of assets# a. Access to computer facilities and records is limited to authorized personnel. b. Training programs are conducted to develop competence of newly hired personnel. c. %ontrol and subsidiary accounts are reconciled on a regularly scheduled basis. d. 8lan* stoc* of all purchase orders and sales invoices are pre-numbered !+. (ccounting information system4
0nitiates transactions a. b. c. d.
:es ,es ;o ;o
rocesses transactions
onitors transactions
:es ,es :es ;o
:es -o ;o :es
!/. "hich of the following statements best describes the entity,s ris* assessment process#
a. b. c. d.
ntity!s process of identifying business risks relevant to financial reporting objectives and deciding about actions to address those risks. Entity,s assessment of audit ris*s affecting the financial statements Entity,s process of evaluating the ris*s of misstatements due to fraud. Entity,s assessment of ris*s that internal control may fail to detect misstatements affecting the financial statements.
!3. "hich of the following deal with ongoing or periodic assessment of the uality of internal control by management# a. uality control activities b. onitoring activities c. 'versight activities d. anagement activities !5. (n entity,s ongoing monitoring activities often include a. eriodic audits by the audit committee b. $eviewing the purchasing function c. The audit of the annual financial statements. d. %ontrol ris* assessment in conjunction with uarterly reviews. &6. The are a. b. c. d.
policies and procedures that help ensure that management directives are carried out referred to as the4 %ontrol environment Control activities onitoring of controls 0nformation system
&1. "hich of the following is not one of the specific control activities that are relevant to financial statement audit# a. erformance reviews b. hysical controls c. Segregation of duties d. Monitoring &2. roper segregation of functional responsibilities in an effective structure of internal control calls for separation of the functions of a. (uthorization execution and payment b. (uthorization recording and custody c. %ustody execution and reporting d. Authorization% payment% and recording &!. "hich of the following activities would be least li*ely to strengthen a company,s internal control a. Separating accounting from other financial operation b. Maintaining insurance for fire and theft c.
d.
=imited available guidance
Consideration of internal control
&/. The a. b. c. d.
auditor,s consideration of a company,s internal control is. $euired under the hilippine (ccountancy (ct 0e(uired by P)A $euired by the %ode of Ethics $ecommended by the SE%
&3. The auditors primary purpose in auditing the client,s system of internal control over financial reporting is4 a. To prevent fraudulent financial statements from being issued to the public. b. "o evaluate the effectiveness of the company!s internal controls over all relevant assertions in the financial statements c. To report to management that the internal controls are effective in preventing misstatements from appearing on the financial statements. d. To efficiently conduct the audit of financial statements. &5. (uditing standards reuire the auditor to obtain an understanding of the client,s internal control structure a. For every audit b.
etermining whether control exists and the entity is using it. c. >etermining whether the control is operating effectively. d. >etermining the consistency of application of internal control procedures )2. 'btaining *nowledge about whether the control is implemented can best be obtained by a. 0nuiry of client,s personnel b. $eading procedures manual c. "racing transactions through the information system relevant to financial reporting. d. erforming tests of control )!. (n auditor should consider two *ey issues when obtaining an understanding of a client,s internal controls. These issues are4 a. The effectiveness and efficiency of the controls b. "he fre(uency and effectiveness of the controls c. The design and implementation of the controls d. The implementation and efficiency of the controls
)&. The auditor uses his understanding of accounting and internal control systems together with the inherent and control ris*s assessments to perform all of the following except a. 0dentify the types of misstatements that could occur b. %onsider factors that affect the ris* of material misstatements c. >esign appropriate audit procedures d. valuate the effectiveness of the accounting and control systems )). "hen obtaining an understanding of the accounting and internal control systems to plan the audit the auditor should obtain *nowledge about the
>esign of the accounting and internal control
'peration
systems a. b. c.
systems
d.
of
accounting
,) :ES ;'
,) ;' ;'
;'
:ES
and
internal
)+. "hen the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system the auditor is said to be4 a. Tracing b. ?ouching c. Performing a walk&through d. Testing controls )/. "hich of the following statements is incorrect about wal*-through tests# a. 0t involves tracing a few transactions through the accounting systems b. This procedure may form part of test of control. c. "he nature and e#tent of walk&through tests performed by the auditor are such that they alone would provide sufficient appropriate audit evidence to support a low assessment of control risk. d. This procedure is performed to determine whether the controls are being implemented. )3. The the the a.
b. c.
d.
auditor,s understanding of the accounting and internal control systems significant to audit is ordinarily obtained through previous experience with the entity. 0n addition auditor may perform the following procedures except 0nuiries of appropriate management supervisory and other personnel at various organizational levels within the entity together with reference to documentation job descriptions and flow charts 0nspection of documents and records produced by the accounting and internal control system 'bservation of the entity,s activities and operations including observation of the organization of computer operations management personnel and the nature of transaction processing. 0eperformance of internal control procedures.
)5. "hen obtaining understanding of the entity,s internal control the auditor should obtain *nowledge about the system,s >esign a. b. c. d.
:ES ,) :ES ;'
0mplementation :ES -' ;' ;'
'perating Effectiveness :ES -' ;' :ES
+6. "hich of the following would an auditor least li*ely perform when obtaining understanding of the entity,s accounting and internal control systems# a. 0nuiries of appropriate personnel b. 0nspection of documents and record c. 'bservation of the entity,s activities and operations d. Performing analytical review procedures +1. (fter obtaining sufficient understanding of the entity,s accounting and internal control systems the auditor should ma*e a preliminary assessment of a. (udit ris* b. Control risk c. 0nherent ris* d. >etection ris* +2. "hich of the following is not a medium that can normally be used by an auditor to record information concerning a client,s internal control policies and procedures# a. ;arrative memorandum b.
employees
while
gaining an
understanding
of
the internal
control
b. c. d.
@pdate information contained in the organization and procedure manuals 1ain knowledge of the design and application of relevant policies% procedures% and records relating to the control structure >etermine the extent of compliance with uality control standards
+&. "hich of the following statements regarding auditor,s documentation of the client,s internal control structure is correct# a. >ocumentation must include flowcharts b. >ocumentation must include procedural write-ups. c. ;o documentation is necessary although it is desirable d. -o one particular form of documentation is necessary% and the e#tent of documentation may vary +). 0n gaining an understanding of the internal control structure the auditor may trace several transactions through the control process. The primary purpose of this tas* is to a. $eplace substantive tests b. >e tec t f rau d c. >etermine the effectiveness of the control procedures d. 2etermine whether the controls have been placed in operation ++. The a. b. c. d.
conclusion reached as a result of assessing control ris* is referred to as the4 (ssurance provided by internal control structure >etermined level of acceptable detection ris* roduct of the understanding of internal control Assessed level of control risk
+/. (n auditor assesses control ris* because it a. 0s relevant to the auditor,s understanding of the control environment b. rovides assurance that the auditor,s materiality levels are appropriate c. 0ndicates to the auditor where inherent ris* may be the greatest d. Affects the level of detection risk that the auditor may accept +3. "hen an auditor increases the assessed level of control ris* because certain control activities were determined to be ineffective the auditor would most li*ely increases the a. Extent of tests of controls b. =evel of detection ris* c. #tent of test of details d. =evel of inherent ris* +5. (n auditor uses the *nowledge provided by the understanding of the internal control and the assessed level of the ris* of material misstatement primarily to a. >etermine whether procedures and records concerning the safeguarding of assets are reliable. b. (scertain whether the opportunities to allow any person to both perpetrate and conceal fraud are minimized c. odify the initial assessments of inherent ris* and preliminary judgments about materiality levels. d. 2etermine the nature% timing and e#tent of substantive tests for financial statements assertions. /6. "hich of the following statements concerning control ris* is correct# a. Assessing control risk and obtaining an understanding of an entity!s internal control structure may be performed concurrently b. "hen control ris* is at a high level an auditor is reuired to document the basis for that assessment c. %ontrol ris* may be assessed sufficiently low to eliminate substantive testing for significant transaction classes d. "hen assessing control ris* an auditor should not consider evidence obtained in prior audits about the operation of control procedures. /1. "hich of the following is a step in an auditor,s decision to assess control ris* at a less than high level# a. (pply analytical procedures to both financial data and nonfinancial information to detect conditions that may indicate wea* controls b. erform tests of details of transactions and accounts balances to identify potential errors and fraud c. $dentify specific internal control policies and procedures that are likely to detect or prevent material misstatements d. >ocuments that the additional audit effort to perform tests of controls exceeds the potential reduction in substantive testing
/2. 0f after obtaining an initial understanding of a client,s internal control the auditor wishes to further reduce the assessed level of control ris* relating to plant asset transactions the auditor should next a. a*e extensive substantive test of plant asset balances b. Establish the physical existence of current year additions c. %omplete the plant asset section of the internal accounting control uestionnaire d. Further test those internal control procedures relating to processing and recording plant asset transactions /!. (n auditor uses the *nowledge provided by the understanding of internal control and the final assessed level of control ris* primarily to determine the nature timing and extent of the a. (ttribute tests b. Test of controls c. %ompliance tests d. )ubstantive tests /&. %ontrol testing is performed in order to determine whether or not a. "he assessed level of control risk can be reduced b. ;ecessary controls are absent c. 0ncompatible function exist d. aterial peso error exist /). Tests of controls do not include a. $eperformace of internal control procedures b. 0nuiries about and observation of internal control which leave no audit trail c. 0nspection of documentary support for transactions evidencing authorization d. Analytical procedures involving comparison of operating e#penses with budgeted amounts /+. To obtain evidential matter about control ris* an auditor selects tests from a variety of techniues including a. $n(uiry b. (nalytical procedures c. %a lcu lat ion d. %onfirmation //.
a.
$t would be efficient to perform tests of controls that would result in a reduction in planned substantive tests b. (dditional evidence to support further reduction in control ris* is not available c. (n increase in the assessed level of control ris* is justified for certain financial statement assertions d. There were many internal control wea*nesses that could allow errors to enter the accounting system 32. (fter studying and evaluating a client,s existing internal control an auditor has concluded that the policies and procedures are well designed and functioning as intended. @nder these circumstances the auditor would most li*ely a. erform further control tests to the extent outlined in the audit program. b. >etermine the control policies and procedures that should prevent or detect errors and fraud. c. Set detection ris* at a higher level than would be set under conditions of wea* internal control d. )et detection risk at a lower level than would be set under conditions of weak internal control. 3!. (fter considering a client,s internal control an auditor has concluded that the system is well designed and is functioning as anticipated. @nder these circumstances the auditor would most li*ely a. %ease to perform further substantive tests b. -ot increase the e#tent of planned substantive tests c. 0ncrease the extent of anticipated analytical procedures d. erform all tests of controls to the extent outlined in the pre-planned audit program 3&. (fter considering internal control an auditor might decide to a. 0ncrease the extent of tests of controls and substantive tests in areas where internal control is strong b. $ncrease the e#tent of substantive tests in areas where internal control is weak c. $educe the extent of tests of controls in areas where internal control is strong d. $educe the extent of both substantive tests and tests of controls in areas where internal control is strong 3). The a. b. c. d.
auditor would most li*ely assess control ris* at a high level when 0t would be efficient to perform test of control "he entity!s accounting and internal control systems are not reliable The auditor wishes to rely on the entity,s accounting and internal control systems The auditor wants to restrict substantive tests
3+. The a. b. c. d.
primary emphasis by auditors is on controls over %lasses of transactions (ccount balances 3oth A and 3% because they are e(ually important 8oth ( and 8 because they vary from client to client
3/. "hen obtaining audit evidence about the effective operation of internal controls the auditor considers all of the following except a. 7ow they were applied b. The consistency with which they were applied during the period c. 8y whom they were applied d. 4hy they were applied 33. "hen control ris* is assessed at a high level the auditor should document his @nderstanding of internal
%onclusion that control ris* is
8asis for concluding that
control components :ES ,) :ES ;'
at a high level :ES ,) ;' :ES
control ris* is at a high level :ES -' ;' ;'
a. b. c. d.
35. "hen control ris* is assessed at less than high level the auditor should document his
@nderstanding of internal control components
a.
,)
8asis for assessing control ris* at less than high level ,)
b. c. d.
:ES ;' ;'
;' :ES ;'
56. The auditor will perform tests of controls when controls are initially assessed as4
a. b. c. d.
=ow :ES :ES ;' ,)
oderate :ES ;' :ES ,)
7igh :ES :ES ;' -'
51. "hich of the following may not be reuired on a particular audit of a company# a. "ests of controls b. (nalytical procedures c. Substantive procedures d. $is* assessment procedures 52. %ontrol ris*s should be assessed in terms of a. Specific controls b. Types of potential fraud c. %ontrol environment factors d. Financial statement assertions
+5. (fter assessing control ris* an auditor desires to see* a further reduction in the assessed level of control ris*. (t this time the auditor would consider whether a. The entity,s controls have been implemented b. The entity,s controls pertain to any financial statements assertions c. 0t would be efficient to obtain an understanding of the entity,s information system d. Additional audit evidence sufficient to support a further reduction is likely to be available 5&. 8ased on the reuirement of S( !!6 how freuently must an auditor test operating effectiveness of controls that appear to functions as they have in past years and on which the auditor wishes to rely in the current year# a. onthly b. ach audit c. at least every second audit d. at least every third audit 5). 8efore assessing control ris* at a level lower than the maximum the auditor obtains reasonable assurance that controls are in use and effectively. This assurance is most li*ely obtained in part by a. Preparing flowcharts b. erforming substantive tests. c. (nalyzing tests of threads and ratios d. 0nspection of documents 5+. (n auditor generally tests the segregation of duties related to inventory by a. Personal in(uiry and observation b. Test counts and cutoff procedures c. (nalytical procedures and invoice recomputation d. >ocument inspection and reconciliation 5/. The auditor may decide to perform some tests of control during an interim visit in advance of the period end. 7owever the auditor cannot rely on the results of such test without considering the need to obtain further audit evidence relating to the remainder of the period.
55. The auditor ordinarily assesses control ris* at a high level for some or all assertions when The entity,s internal control is effective a. b. c. d.
Evaluating the effectiveness of the control would not be efficient :ES ;' ;' ,)
:ES :ES ;' -'
166. The objective of tests of details of transactions performed as tests of controls is to a. onitor the design and use of entity documents such as prenumbered shipping form b. >etermine whether controls have been placed in operation c. >etect material misstatements in the account balances of the financial statements d. valuate whether controls operated effectively 161. Tests of controls are assessment of control ris* a. (t a high level b. At less than high level c. (t ze ro lev el d. (t the maximum level
designed
to
obtain
evidence
to
support
the
auditor,s
1 62 . ( n audi tor i s l i* ely t o u se f ou r ty pe s of p ro ce dur es t o s upp ort t he o pera tin g effectiveness of internal controls. "hich of the following would generally ;'T be used# a. a*e inuiries of appropriate client personnel b. #amine documents% records% and reports c. $eperform client procedures d. 0nspect the design of documents 16!. aterial wea*nesses in internal control of a public company must be reported in writing to which of the following# a. The SE% b. Members of the management who are responsible for the related area of the company c. (udit committee of the company,s board of directors d. The 0%( 16&. a.
"hen a compensating control exists the absence of a *ey control4 $s no longer a concern because there is no longer a significant deficiency or material weakness b. 0s still a major concern to the auditor c. %ould cause a material loss so it must be tested using substantive procedures d. 0s magnified and must be removed from the sampling process and examined in its entirety
16). 0n general a material wea*ness in internal control may be defined as a condition in which material errors or irregularities may occur and not be detected within a timely period by a. (n independent auditor during tests of controls b. anagement when reviewing interim financial statements and reconciling account balances c. mployees in the normal course of performing their assigned functions d. 'utside consultants who issue a special-purpose report on internal control structure 16+. ( consideration of internal control made during an audit is usually not sufficient to express an opinion on an entity,s controls because a. "ea*nesses in the system may go unnoticed during the audit engagement b. ( consideration of internal control is not necessarily made during an audit engagement c. 'nly those controls on which an auditor intends to rely are reviewed% tested and evaluated d. %ontrols can change each year 16/. >uring the consideration of internal control in a financial statement audit an auditor is not obligated to a. )earch for significant deficiencies in the operation of the internal control b. @nderstand the internal control and the information system c. >etermine whether the control activities relevant to audit planning have been implemented
d. 163. a. b. c.
d.
erform procedures to understand the design of internal control The management letter is used To allow management to corroborate oral representations to the auditor "o confirm the terms of the audit engagement To document the auditor,s consideration of internal controls To ma*e recommendations to the client based on observations made during the audit.
