Principles of auditing
ch 8 Internal Controls
Homework Answers
| Q-10 | The internal control process comprises of basic elements like control environment, risk assessment, control activities, information and communication, monitoring. Control risk is not an element. | Hence, correct answer is B. Control Risk | ||||||||
| Q-11 | To perform the audit procedure, first of all the auditor should be aware of the control enviroment in which orgainization is working. Hence first step should be Understand the system of internal control. | hence, correct answer is D. Understand the system of internal control…. | ||||||||
| Q-12 | The internal control process comprises of basic elements like control environment, risk assessment, control activities, information and communication, monitoring. Auditor's business risk is not an element | hence, correct answer is A. Auditor's Business risk | ||||||||
| Q-13 | Control enviroment shows the managements commitment towards ethical values, code of conduct, way of managing the enterprise, organization culture. Process for initating transactions, monthly bank reconciliations or segregation of duties are routine works these are not control environment these are merely few processes. | hence, correct answer is B. Code of conduct |
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Principles of auditing
ch 8 Internal Controls
QUESTION 10 Which of the following elements is not...
principles of auditing chapter 2 QUESTION 7 The internal controls of an entity are the policies...
principles of auditing
chapter 2
QUESTION 7 The internal controls of an entity are the policies and procedures, which the entity has implemented to provide reasonable assurance that the entity's objectives are being achieved. True False QUESTION 8 The three generally accepted auditing standards classified as general standards can be described as criteria for the A. Content of the auditor's report, study of internal control, and planning. B. Competence, independence, and professional care of individuals performing the audit. C. Content...
principles of auditing chapter 2 QUESTION 13 The three generally accepted auditing standards classified as general...
principles of auditing
chapter 2
QUESTION 13 The three generally accepted auditing standards classified as general standards can be described as criteria for the A. Competence, independence, and professional care of individuals performing the audit. B. Planning and supervision of the audit engagement C. Content of the financial statements and related footnote disclosures and the consistency standard. D. Content of the auditor's report, study of internal control, and planning. QUESTION 14 The internal controls of an entity are the policies...
Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to the audit committee
1. Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to the audit committee? A. Management's failure to renegotiate unfavorable long-term purchase commitments.B. Recurring operating losses that may indicate going concern problems.C. Evidence of a lack of objectivity by those responsible for accounting decisions.D. Management's current plans to reduce its ownership equity in the entity. 2. After obtaining an understanding of internal control and arriving at a preliminary assessed level...
Requirement a. Identify the phase of the audit in which each activity occurs. Phase of Audit...
Requirement a. Identify the phase of the audit in which each activity occurs. Phase of Audit Set acceptable audit risk and decide preliminary judgment about materiality 1. and performance materiality Understand internal control and assess 2. control risk. I. Plan and Design an Audit Approach Perform substantive analytical 3. procedures for accounts payable. II. Perform Tests of Controls and Substantive Tests of Transactions JII. Perform Substantive Analytical Procedures and Tests of Details of Balances 4. Confirm accounts payable. IV. Complete...
1.Which of the following is not one of the steps the auditor must perform to assess...
1.Which of the following is not one of the steps the auditor must perform to assess control risk at less than “high” for a financial statement assertion? A) obtain an understanding of internal control B) identify controls that address all relevant assertions in the financial statements C) make a preliminary assessment of control risk based on the design of relevant controls D) test the operating effectiveness of the controls that must be effective to reduce control risk 2.Which of the...
principles of auditing chapter 2 QUESTION 11 Audit risk for an individual account consists of business...
principles of auditing
chapter 2
QUESTION 11 Audit risk for an individual account consists of business risk, detection risk, and control risk. True False QUESTION 12 There is an inverse relationship between the effectiveness of an entity's system of internal control and the A. Reliability of financial statements. B. Fairness of management assertions in the financial statements. C. Degree of staff supervision required in the performance of an audit. D. Extent of detailed audit tests required.
1. Auditing includes the concept of materiality. Which of the following would be considered material? a)The...
1. Auditing includes the concept of materiality. Which of the following would be considered material? a)The auditor confirms accounts receivable and notices one company has not sent in the confirmation form b)The auditor discovers a $200 error in the inventory account balance of $500,000 c)The auditor discovers related-party transactions are not recorded d)The auditor notices the name of the new CEO, hired in January 20x2 is not included in the annual report for 20x1 2. Substantive procedures would include: a)Gathering...
1. Consider the following statements: I. Per COSO, Control Activities are the policies and procedures...
1. Consider the following statements: I. Per COSO, Control Activities are the policies and procedures that help insure that management’s directives are carried out. II. A Reliance Strategy is used when control risk is considered High. a. I is true; II is true b. I is true; II is false c. I is false; II is true d. I is false; II is false 2. Management's attitude toward aggressive financial reporting and its...
principles of auditing chapter 2 QUESTION 9 In a financial statement audit, inherent risk represents A....
principles of auditing
chapter 2
QUESTION 9 In a financial statement audit, inherent risk represents A. The risk that the auditor fails to modify materially misstated financial statements. B. The risk that misstatements could occur and not be prevented or detected by the system of internal control. C. The susceptibility of an account balance to misstatement that could be material. D. The risk that misstatements could occur and not be detected by the auditor's procedures. QUESTION 10 An auditor strives...
Which of the following is not a component of internal controls? A. Monitoring. B Inherent risk....
Which of the following is not a component of internal controls? A. Monitoring. B Inherent risk. C. Control activities. D. Control environment.
principles of auditing
chapter 2
QUESTION 7 The internal controls of an entity are the policies and procedures, which the entity has implemented to provide reasonable assurance that the entity's objectives are being achieved. True False QUESTION 8 The three generally accepted auditing standards classified as general standards can be described as criteria for the A. Content of the auditor's report, study of internal control, and planning. B. Competence, independence, and professional care of individuals performing the audit. C. Content...
principles of auditing
chapter 2
QUESTION 13 The three generally accepted auditing standards classified as general standards can be described as criteria for the A. Competence, independence, and professional care of individuals performing the audit. B. Planning and supervision of the audit engagement C. Content of the financial statements and related footnote disclosures and the consistency standard. D. Content of the auditor's report, study of internal control, and planning. QUESTION 14 The internal controls of an entity are the policies...
Requirement a. Identify the phase of the audit in which each activity occurs. Phase of Audit Set acceptable audit risk and decide preliminary judgment about materiality 1. and performance materiality Understand internal control and assess 2. control risk. I. Plan and Design an Audit Approach Perform substantive analytical 3. procedures for accounts payable. II. Perform Tests of Controls and Substantive Tests of Transactions JII. Perform Substantive Analytical Procedures and Tests of Details of Balances 4. Confirm accounts payable. IV. Complete...
principles of auditing
chapter 2
QUESTION 11 Audit risk for an individual account consists of business risk, detection risk, and control risk. True False QUESTION 12 There is an inverse relationship between the effectiveness of an entity's system of internal control and the A. Reliability of financial statements. B. Fairness of management assertions in the financial statements. C. Degree of staff supervision required in the performance of an audit. D. Extent of detailed audit tests required.
principles of auditing
chapter 2
QUESTION 9 In a financial statement audit, inherent risk represents A. The risk that the auditor fails to modify materially misstated financial statements. B. The risk that misstatements could occur and not be prevented or detected by the system of internal control. C. The susceptibility of an account balance to misstatement that could be material. D. The risk that misstatements could occur and not be detected by the auditor's procedures. QUESTION 10 An auditor strives...
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