acct 241 ch 5

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  1. An entity's internal control consists of the policies and procedures established to proivde reasonable assurance that specific entity objectives will be achieved. Only some of these objectives, policies, and procedures are relevant to a financial statement audit. Which one of the following would most likely be considered in such an audit?
    A. maintenance of control over unused checks
    B. marketing analysis of sales generated by advertising objectives
    C. timely reporting and review of quality control results
    D. maintenance of statistical production analyses
    A. maintenance of control over unused checks
    (this multiple choice question has been scrambled)
  2. An internal control questionaire (ICQ) contains the following question: "Does a single individual receive and list cash receipts and perform posting to sales and general ledgers?" What action should an auditor take if the manager of accounting reponds "yes" to the question?
    A. treat it as a potential control weakness and perform appropriate testing
    B. include it with other reporting findings in the next audit report
    C. statistically sample the response along with all other "yes" responses to verify their accuracy
    D. No action is required because "yes" repsonses on an ICQ indicate the presence of good control
    A. treat it as a potential control weakness and perform appropriate testing
    (this multiple choice question has been scrambled)
  3. The primary responsibility for establishing and maintaining internal controls rests with
    A. management
    B. the internal auditors
    C. the external auditors
    D. the Public Company Accounting Oversight Board
    A. management
    (this multiple choice question has been scrambled)
  4. Which method provides the auditor with the best visual grasp of a system and a means for analyzing complex operations?
    A. a flowcharting approach
    B. a detailed narrative approach
    C. a questionaire approach
    D. a matrix approach
    A. a flowcharting approach
    (this multiple choice question has been scrambled)
  5. Which of the following factors are included in an entity's control environment?
    audit committe internal audit function management style
    A. no yes yes
    B. yes no yes
    C. yes yes yes
    D. yes yes no
    C. yes yes yes
    (this multiple choice question has been scrambled)
  6. An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about
    A. the entity's ability to process and summarize financial data
    B. appropriate prices the entity should charge for its products
    C. methods of assigning production tasks to employees
    D. the efficiency of management's decision making process
    A. the entity's ability to process and summarize financial data
    (this multiple choice question has been scrambled)
  7. In addition to gaining an understanding of the internal controls for a private company, an external auditor, at minimum, would be expected to
    A. study organization charts to obtain an understanding of the informal lines of communications
    B. trace a few transactions through the control process to obtain evidence that the controls have been placed in operation
    C. evaluate the internal auditor's work as an important part of the accounting system element of the internal controls
    D. observe client employees to determine the extent of their compliance with quality control standards
    B. trace a few transactions through the control process to obtain evidence that the controls have been placed in operation
    (this multiple choice question has been scrambled)
  8. An advantage of an internal control questionaire is
    A. flexibility in design and application
    B. that it provides sufficient data for the assessment of control risk
    C. its strict adherence to a yes/no format
    D. ease of completion
    D. ease of completion
    (this multiple choice question has been scrambled)
  9. Which of the following is an inherent limitation of any client's internal control?
    A. procedures whose effectiveness depends on separation of duties can be circumvented by collusion
    B. procedures designed to assure the execution and recording of transactions in accordance with proper authorizations are effective against frauds perpetrated by management
    C. the competence and integrity of client personnel provide an envirnoment conductive to control and provides assurance that effective control will be achieved
    D. the benefits expected to be derived from effective internal controls usually do not exceed the costs of such controls
    A. procedures whose effectiveness depends on separation of duties can be circumvented by collusion
    (this multiple choice question has been scrambled)
  10. Internal controls are designed to provide reasonable assurance that
    a. management's plans have not been circumvented by worker collusion
    b. the internal auditing department's guidance and oversight of management's performance is accomplished economically and efficiently
    c. management's planning, organizing, and directing processes are properly evaluated
    d. material errors of fraud would be prevented or detected and corrected within a timely period by employees in the course of performing their assigned duties
    • d. material errors of fraud would be prevented or detected and corrected
    • within a timely period by employees in the course of performing their
    • assigned duties
  11. The most important fundamental concept involved in a company's internal control is:
    A. effectivness and efficiency of operations
    B. compliance with applicable laws and regulations
    C. relaibility of financial reporting
    D. people operate the control system
    D. people operate the control system
    (this multiple choice question has been scrambled)
  12. The primary purpose for obtaining an understanding of an audit client's internal control is to:
    A. provide information for a communication of internal control related maters to managment
    B. provide a basis for making constructive suggestions in a management letter
    C. obtain sufficient competent audit evidence to afford a reasonable basis for an opinion on the financial statements under examination
    D. determine the nature, timing, and extent of tests to be performed in the audit
    D. determine the nature, timing, and extent of tests to be performed in the audit
    (this multiple choice question has been scrambled)
  13. Reduction of audit procedures can be characterized by:
    A. selecting larger sample sizes for audit
    B. moving audit procedures to the fiscal year end date
    C. deciding to obtain external evidence instead of internal evidence
    D. selecting smaller sample sizes for audit
    D. selecting smaller sample sizes for audit
    (this multiple choice question has been scrambled)
  14. Of the internal control objectives categorized by COSO, which is most important to auditors?
    A. effectiveness and efficiency of operations
    B. compliance with laws and regulations
    C. reliability of financial reporting
    D. management philosophy and operating style
    C. reliability of financial reporting
    (this multiple choice question has been scrambled)
  15. Which of the following is application controls?
    A. locked doors to the central server
    B. change controls over new programs
    C. an output control department that ensures that reports go to authorized recipients
    D. back up controls
    C. an output control department that ensures that reports go to authorized recipients
    (this multiple choice question has been scrambled)
  16. In the weekly computer run to prepare payroll checks, a check was printed for an employee who had been terminated the previous week. Which of the following controls, if properly utilized, would have been most effective in preventing the eeror or ensuring its prompt detection?
    A. use of the check digit for employee numbers
    B. a control total for hours worked, prepared from time cards collected by the timekeeping department
    C. requiring the treasure's office to account for the numbers of the prenumbered checks issued to the computer department for the processing of the payroll
    D. use of a header label for the payroll input sheet
    B. a control total for hours worked, prepared from time cards collected by the timekeeping department
    (this multiple choice question has been scrambled)
  17. In most audits of large companies, internal control risk assessment contributes to audit effiency, which means:
    A. the cost of control evaluation work will exceed the cost of substantive procedures
    B. the cost of substantive procedures will exceed the cost of control evaluation work
    C. auditors will be able to reduce the cost of substantive procedures by an amount more than the control evaluation costs
    D. auditors will be able to reduce the cost of substantive procedures by an amount less than the control evaluation costs
    C. auditors will be able to reduce the cost of substantive procedures by an amount more than the control evaluation costs
    (this multiple choice question has been scrambled)
  18. Which of the following is a device designed to help the audit team obtain evidence about the control environment and about the accounting and control procedures of an audit client?
    A. an internal control questionaire
    B. a flowchart of the documents and procedures used by the company
    C. a narrative memorandum describing the control system
    d. all of the above
    A. an internal control questionaire
    (this multiple choice question has been scrambled)
  19. A bridge working paper shows the connection between:
    A. control objectives and company control procedures
    B. financial statement assertions and test of controls
    C. control objectives and accounting system procedures
    D. control evaluation findings and subsequent audit procedures
    D. control evaluation findings and subsequent audit procedures
    (this multiple choice question has been scrambled)
  20. Tests of controls are required for:
    A. accomplshing control over the occurrence of recorded transactions
    B. obtaining evidence about the financial statement assertions
    C. analytical procedures applied to finacial statemetn balance
    D. obtaining evidence about the operating effectiveness of client control procedures
    D. obtaining evidence about the operating effectiveness of client control procedures
    (this multiple choice question has been scrambled)
  21. A client's control procedures is:
    a. an actions taken by auditors to obtain evidence
    b. an action taken by client personnel for the purpose of preventing, detecting, and correcting errors and frauds in transactions
    c. a method for recording, summarizing, and reporting financial informatoin
    d. the functioning of the board of directors in support of its audit committee
    • b. an action taken by client personnel for the purpose of preventing,
    • detecting, and correcting errors and frauds in transactions
  22. When planning an audit, an auditor's prior experience with the client's internal control procedures can be used to:
    A. find evidence of whether management has circumvented controls by collusion
    B. assess the operational efficiency this year of the internal controls in general
    C. identify the errors and frauds that could occur in the business
    D. prepare audit files documenting the decision about the control risks this year
    C. identify the errors and frauds that could occur in the business
    (this multiple choice question has been scrambled)
  23. Totals of amounts in computer record data fields that are not usually added but are used only for data processing control purposes are called:
    A. hash totals
    B. processing data totals
    C. field totals
    D. record totals
    A. hash totals
    (this multiple choice question has been scrambled)
  24. In updating a computerized accounts receivable file, which one of the following would be used as a batch control to verify the accuracy of the posting of cash receipts remittances?
    A. the sum of the cash deposits plus the discounts taken by customers
    B. the sum of the cash deposits
    C. the sum of the cash deposits plus the discounts less the sales returns
    D. the sum of the cash deposits less the discounts taken by customers
    A. the sum of the cash deposits plus the discounts taken by customers
    (this multiple choice question has been scrambled)
  25. AS 2 requires auditors to test
    A. design effectiveness only
    B. both operating and design effectiveness
    C. operating effectiveness only
    B. both operating and design effectiveness
    (this multiple choice question has been scrambled)
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wsrdpc
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Card Set:
acct 241 ch 5
Updated:
2010-08-06 01:06:12
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acct 241 ch 5
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