acct 241 ch 5

  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?

    C. maintenance of control over unused checks
  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?

    C. treat it as a potential control weakness and perform appropriate testing
  3. The primary responsibility for establishing and maintaining internal controls rests with

    A. management
  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
  5. Which of the following factors are included in an entity's control environment?
    audit committe internal audit function management style

    D. yes yes yes
  6. An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about

    C. the entity's ability to process and summarize financial data
  7. In addition to gaining an understanding of the internal controls for a private company, an external auditor, at minimum, would be expected to

    B. trace a few transactions through the control process to obtain evidence that the controls have been placed in operation
  8. An advantage of an internal control questionaire is

    D. ease of completion
  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
  10. Internal controls are designed to provide reasonable assurance that

    • A. 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:

    B. people operate the control system
  12. The primary purpose for obtaining an understanding of an audit client's internal control is to:

    A. determine the nature, timing, and extent of tests to be performed in the audit
  13. Reduction of audit procedures can be characterized by:

    B. selecting smaller sample sizes for audit
  14. Of the internal control objectives categorized by COSO, which is most important to auditors?

    A. reliability of financial reporting
  15. Which of the following is application controls?

    B. an output control department that ensures that reports go to authorized recipients
  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?

    B. a control total for hours worked, prepared from time cards collected by the timekeeping department
  17. In most audits of large companies, internal control risk assessment contributes to audit effiency, which means:

    A. auditors will be able to reduce the cost of substantive procedures by an amount more than the control evaluation costs
  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?

    B. an internal control questionaire
  19. A bridge working paper shows the connection between:

    B. control evaluation findings and subsequent audit procedures
  20. Tests of controls are required for:

    A. obtaining evidence about the operating effectiveness of client control procedures
  21. A client's control procedures is:

    • D. 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:

    B. identify the errors and frauds that could occur in the business
  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:

    B. hash totals
  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?

    C. the sum of the cash deposits plus the discounts taken by customers
  25. AS 2 requires auditors to test

    C. both operating and design effectiveness
Card Set
acct 241 ch 5
acct 241 ch 5