AUD Module III

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AUD Module III
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2011-02-25 23:32:51
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AUD Module III Burke
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  1. which of the following most likely would not considered an inherent limitation the potential effectiveness of an entity's internal control
    incompatible duties
  2. when considering internal control, and auditor should be aware of the concept of reasonable assurance, which recognizes that
    the cost of an entity's internal control should not exceed the benefits expected to be derived
  3. proper segregation of functional responsibilities calls for separation of functions of
    authorization, recording, and custody
  4. and entities ongoing monitoring activities often include
    reviewing the purchasing function
  5. the overall attitude in awareness of and entities Board of Directors concerning the importance of internal control usually is reflected in its
    control environment
  6. management philosophy and operating style most likely would have a significant influence on and entities control environment when
    management is dominated by one individual
  7. which of the following factors are included in an entity's control environment
    audit committee yes, integrity and ethical values yes, or is organizational yes
  8. which of the following is not a component of an entity's internal control
    control risk
  9. which of the following is a provision of the foreign corrupt practices act
    every publicly held company must devise, document, and maintain internal control sufficient to provide reasonable assurances that internal control objectives are met
  10. an audit tour suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all
    cash disbursements
  11. which of the following procedures most likely would provide an auditor with evidence about whether in entities internal control activities are suitably designed to prevent or detect material misstatements?
    Observing the entities personnel applying the activities
  12. which statement is correct concerning the relevance of various types of controls to a financial audit?
    Controls over the reliability of financial reporting are ordinarily most directly relevant to an audit, but other controls may also be relevant.
  13. In an audit of financial statements in accordance with generally accepted auditing standards, GaAs, and auditory is required to
    document the auditors understanding of the entity's internal control
  14. in obtaining an understanding of an entity's internal control relevant to audit planning, and auditor is required to obtain knowledge about the
    design of the controls pertaining to internal control components
  15. and auditor should obtain sufficient knowledge of an entities information system to understand the
    process used to prepare significant accounting estimates
  16. when obtaining an understanding of an entities internal control, and auditors should concentrate on the substance of controls rather than their form because
    management may establish appropriate controls but not enforce compliance with them
  17. decision tables differ from program flowcharts and that decision tables emphasize
    logical relationships among conditions and actions
  18. during the consideration of internal control in the financial statement audit, and auditor is not obligated to
    searcher significant deficiencies in the operation of the internal control
  19. a primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with
    knowledge necessary to assess the risks of material misstatements
  20. which of the following statements regarding auditor documentation of the clients internal control is correct
    no one particular form of documentation is necessary, and the extent of documentation may very
  21. in obtaining an understanding of an entity's internal control, and auditor is required to obtain knowledge about the
    operating effectiveness of controls, no, design of controls, yes
  22. which of the following may not be required on a particular audit of a nonissue or, nonpublic, company
    test of controls
  23. control risk should be assessed in terms of
    financial statement assertions
  24. after assessing control risk, and auditor decides to seek further reduction in the assessed level of control risk. At this time, the auditor would consider whether
    additional audit evidence sufficient does Porter further reduction is likely to be available
  25. assessing control risk and the low level most likely would involve
    identifying specific controls relevant civic assertions
  26. in auditor assesses control risk because it
    affects the level of detection risk that the auditor may accept
  27. when in auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor most likely increase the
    extent of tests of details
  28. in auditor uses the knowledge provided by the understanding of internal control in the assessed level of the risk of material misstatement permanent early to
    determine the nature, timing and extent of substantive tests for financial statement assertions
  29. in auditor may compensate for weakness in internal control by increasing the
    extent of analytical procedures
  30. which of the following statements is correct concerning and auditors assessment of control risk
    the basis for and auditors conclusions about the assessed level of control risk need not be documented in this control risk is assessed at the maximum level
  31. regardless of the assessed level of control risk, and auditor would form some
    dual-purpose test to evaluate both the risk of monetary misstatement and preliminary control risk
  32. how frequently must and auditor test operating effectiveness of controls that appear to function as they have in past years and knowledge the auditor wishes to rely in the current year
    at least every third audit
  33. before assessing control risk at a level lower than the maximum, the auditor obtains reasonable assurance that controls are in use in operating effectively. This assurance is most likely obtained in part by
    preparing flowcharts
  34. in auditor general least tests the segregation of duties related to inventory by
    personal inquiry and observation
  35. the objective of tests of details of transactions performed this tests of controls is to
    evaluate whether controls operate effectively
  36. after obtaining an understanding of internal control and assessing the risk of material misstatement, and auditor decided to form tests of controls. The auditor most likely decided that
    it would be efficient to perform tests of controls that would result in a reduction and ran substantive tests
  37. in assessing control risk, and auditor ordinarily selects from a variety of techniques, including
    preperformance and observation
  38. which of the following types of evidence would in auditor most likely examined to determine whether controls are operating as designed
    client records documenting the use of computer programs
  39. which of the following is not a step in an auditors assessment of control risk
    perform tests of details of transactions to detect material misstatements in the financial statements
  40. to obtain audit evidence about control risk, and auditor selects tests from a variety of techniques including
    inquiry
  41. which of the following is least likely to be evidence the auditor examines determine whether controls are operating effectively
    confirmations of Accounts Receivable
  42. which of the following procedures concerning Accounts Receivable within auditor most likely perform to obtain evidence in support of an assessed level of control risk below the maximum
    observing entities employee prepare schedule of past-due accounts receivable
  43. internal control provisions of the Sarbanes-Oxley act of 2002 apply to which companies in the US
    SECregistrars
  44. the framework most likely to be used by management and its internal control assessment under requirements of the Sarbanes-Oxley act of 2002 is the
    COS oh internal framework
  45. which of the following is correct concerning the level of assistance auditors may provide in assisting management with its assessment of internal control
    only very limited assistance may be provided
  46. which of the following need not be included in management's report on internal control under section 404 a of the Sarbanes-Oxley act of 2002
    management statement of responsibility to establish and maintain internal control has no significant deficiencies
  47. which of the following is an accurate statement about internal control weaknesses
    material weaknesses are also control deficiencies
  48. in an integrated audit, which of the following is defined as a weakness in internal control that is less severe than a material weakness important enough to warrant attention by those responsible for oversight of the financial reporting function
    significant deficiency
  49. material weakness is a significant deficiency or combination of significant deficiencies that results of a reasonable possibility that a misstatement of at least what amount will not be prevented or detected
    a material amount
  50. the minimum likelihood of loss involved in the consideration of a control deficiency is
    not explicitly considered
  51. assume the company has a control deficiency regarding the processing of cash receipts. Reconciliation of cash accounts by competent individual otherwise independent of the cash function might make the likelihood of the significant misstatement due to the control deficiency remote. In this situation, reconciliation may be referred to as what type of control
    compensating
  52. according to public company accounting oversight board standard five, what type of transaction involves establishing a loan-loss reserve
    estimation transaction
  53. it procedure that involves tracing a transaction from origin nation to the company's information systems until it is reflected in the company's financial report is referred to as a
    walk-through
  54. for purposes of an audit of internal control performed under public company accounting oversight board standards, the as of date is ordinarily
    the last day of the physical.
  55. Consider a public company whose purchases are made to the Internet and by telephone. Which of the following is correct
    these types of purchases represent two major classes of transactions within the purchases process
  56. for public company audit of internal control, walk-throughs provide the auditor primary evidence to
    evaluate the effectiveness of the design of controls yes, confirm whether controls have been placed in operation yes
  57. which is most likely to be a question asked of employee personnel during a walk-through an audit of the internal control of a public company
    have you ever been asked to override the process
  58. how large must the actual loss identified by the auditor be for control deficiency to possibly be considered a material weakness
    immaterial yes, material yes
  59. for purposes of an audit of internal control performed under public company accounting oversight board requirements, and account the significant if there is more than a
    remote likelihood that it could contain material misstatements
  60. a controlled efficiency that is more than a significant deficiency is most likely to result in what form of audit opinion relating to internal control
    adverse
  61. which of the following is most likely to be considered a material weakness in internal control for purposes of an internal troll audit of a public company
    and ineffective oversight of financial reporting by the audit committee
  62. inability to evaluate internal control due to the circumstance caused scope limitation relating to a significant account in the Sarbanes-Oxley 404 internal control audit is most likely to result in a
    qualified opinion
  63. which of the following is most likely to indicate a significant deficiency relating to a clients antifraud programs
    audit committee passivity when conducting oversight functions
  64. and auditor identified a material weakness in December. The client was informed and corrected it shortly after the as of date December 31, the auditor agrees that the correction aluminous the material weakness as of January 31.. The appropriate report under a PCAOB standard five audit of internal control is
    adverse
  65. in an integrated audit, which of the following leads to an adverse opinion on can internal control
    material weaknesses yes, significant deficiencies no
  66. an integrated audit, what must the auditor communicate to the audit committee
    no material weaknesses yes, all control deficiencies no
  67. in which manner a significant deficiencies communicated by the auditors to the audit committee under public company accounting oversight board standard five
    the communication must be in written form
  68. which is correct concerning the external auditors use of the work of others an audit of internal control perform for public company
    ordinarily the work of internal auditors and others is used primarily in low risk areas
  69. an integrated audit, which must the auditor communicate in writing on to management
    material weaknesses, significant deficiencies and other control deficiencies
  70. which of the following is correct when applying a top-down approach to identify controls to test an integrated audit
    for certain assertions, strong entity level controls may allow the auditor to admit additional testing beyond those controls
  71. which of the following is not included in the standard unqualified opinion on internal control over financial reporting performed under PCAOB requirements
    the company management and audit committee is responsible for maintaining effective internal control over financial reporting
  72. walk-throughs ordinarily provide evidence it helps the auditor to
    evaluate design effectiveness of controls yes, confirm whether controls of them placed in operation yes
  73. which of the following procedures would and auditor most likely performed to test controls relating to management's assertion about the completeness of cash receipts for cash sales at a retail outlet
    observe the consistency of the employees use of cash registers and tapes
  74. sound internal control dictates that immediately upon receiving checks from customers by mail, a responsible employee should
    prepare a duplicate listing of checks received
  75. tracing shipping documents to prenumbered sales invoices provides evidence that
    shipments to customers were properly invoiced
  76. which of the following controls most likely would reduce the risk of diversion of customer receipts by and entities employees
    a bank lockbox system
  77. and auditor some suspects the client cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme the auditor most likely would compare the
    dates checks are deposited per bank statements with the dates remittance credits are recorded
  78. upon receipt of customers checks in the mail room, responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the
    Treas. compare the listing with the monthly bank statement
  79. which of the following procedures most likely would not be a control designed to reduce the risk of misstatements in the billing process
    reconciling the troll totals for sales invoices with the Accounts Receivable subsidiary ledger
  80. which of the following audit procedures within auditor most likely performed to test controls relating to management assertion concerning the completeness of sales transactions
    inspect the entities reports for prenumbered shipping documents that have not been recorded in the sales Journal
  81. which of the following controls most likely would assure that all bills sales are correctly posted to the Accounts Receivable ledger
    daily sales summaries are compared to daily postings to the Accounts Receivable ledger
  82. and auditor tests and entities policy of obtaining credit approval before shipping goods to customers in support of management financial statement assertion of
    valuation or allocation
  83. which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded
    the billing department supervisor matches prenumbered shipping documents with entries in the sales Journal
  84. which of the following controls most likely would be effective it in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debtwrite-offs
    employees involved in the credit granting function separated from the sales function
  85. proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments
    Treas.
  86. employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals and
    deterred the dishonesty by making employees aware that insurance companies may investigate and prosecute dishonest acts
  87. during consideration of the small business clients internal control, the auditor discovered that the Accounts Receivable work approves credit memos and has asked us to cash. Which of the following controls would be most effective in offsetting this weakness?
    The owner reviews credit memos after they recorded
  88. when a customer fails to include a remittance advice with the payment, it is common practice for the person opening the mail to pair one. Consequently, mail should be open by which of the following for company employees
    receptionist
  89. to provide assurance that each voucher is submitted and paid only once, and auditor most likely would examine a sample of pay vouchers and determine whether each voucher is
    stamped paid by the check signer
  90. in testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also
    is responsible for mailing checks
  91. in assessing control risk for purchases and auditor poaches a sample of entries in the voter register to the supporting documents. Which assertion with this test of controls most likely support
    existence or occurrence
  92. which of the following controls is not usually performed in the vouchers payable department
    accounting for unused prenumbered purchase orders and receiving reports
  93. with properly designed internal control, the same employee most likely would match vendors invoices with receiving reports and also
    recompute the calculations on vendors invoices
  94. an entity's internal control requires for every check request that there be improved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, and auditor most likely would select items for testing the population of all
    canceled checks
  95. which of the following questions would most likely be included in internal control questionnaire concerning completeness assertion for purchases
    are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for
  96. for effective internal control, the Accounts Payable department generally should
    establish the agreement of the vendors invoices the receiving report and purchase order
  97. internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the
    receiving department press
  98. the client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner
    reconciling vendor's monthly statements with subsidiary payable ledger accounts
  99. with well-designed internal control, employees in the same department most likely would approve purchase orders, and also
    negotiate terms with vendors
  100. in obtaining an understanding of a manufacturing entities internal control over inventory balances, and auditor most likely would
    review the entities descriptions of inventory policies and procedures
  101. which of the following controls most likely would be used to maintain accurate inventory records
    periodic inventory counts are used to adjust the perpetual inventory records
  102. the client maintains perpetual inventory records in both wannabes in dollars. If the assessed level of control risk is high, and auditor would probably
    request the client scheduled the physical inventory count at the end of the year
  103. which of the following controls most likely addresses the completeness assertion for inventory
    receiving reports a prenumbered and periodically reconciled
  104. sound internal control dictates that effective merchandise return by customers should be presented initially to the
    receiving clerk
  105. A company uses its sales invoices for posting perpetual inventory records inadequate controls over the invoicing function allows goods to be shipped that are not invoiced inadequate controls because in
    understatement of revenues and receivables, and an overstatement of inventory
  106. of the following is a question that the auditor would expect to find on the production cycle section of internal control questionnaire
    are all releases by storekeepers of raw materials from storage based on approved requisition documents
  107. the objectives of internal control for production cycle are to provide assurance that transactions are properly executed and recorded and that
    custody of work in progress and of finished goods is properly maintained

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