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Exam 7: Internal Control

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Question 31

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When tests of controls reveal that controls are operating as anticipated,it is most likely that the assessed level of control risk will:

A) Be less than the preliminary assessed level of control risk.
B) Equal the preliminary assessed level of control risk.
C) Equal the actual control risk.
D) Be less than the actual control risk.

E) A) and B)
F) A) and C)

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Question 32

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Which of the following is true about the auditors' consideration of internal control in a financial statement audit?

A) The auditors must assess control risk at a level lower than the maximum.
B) The auditors must prepare a flowchart description of internal control for their working papers.
C) The auditors must obtain an understanding of the steps in processing major types of transactions.
D) The auditors must perform tests of controls.

E) A) and B)
F) A) and C)

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Question 33

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In the consideration of internal control,the operating effectiveness of controls is tested by:

Which of the following is most likely to be considered a risk assessment procedure relating to internal control?

When considering a client's internal control,the auditors focus on its various characteristics.For each of the following characteristics indicate the auditors' responsibility under generally accepted auditing standards and the procedures used to meet that responsibility. a.The design of internal control. b.Controls have been implemented (placed in operation). c.The operating effectiveness of controls.

Which of the following is not ordinarily a procedure for documenting an auditor's understanding of internal control for planning purposes?

In a financial statement audit performed following AICPA Professional Standards,how frequently must an auditor test operating effectiveness of controls that appear to function as they have in past years and on which the auditor wishes to rely upon in the current year?

If the auditors do not perform tests of controls for certain assertions:

A situation in which the design or operation of a control does not allow management or employees,in the normal course of performing their assigned functions,to prevent or detect material misstatements on a timely basis is referred to as a:

CPA firms may use written narratives to describe internal control in their audit working papers.

Which of the following is least likely to be considered an appropriate response relating to risks the auditors identify at the financial statement level?

If the auditors' assessment of the design of internal control reveals that it cannot be relied upon,the auditors are not required to prepare any documentation of internal control for their working papers.

Which of the following is least likely to be considered a risk assessment procedure relating to internal control?

The report of a service auditor may provide assurance on whether: $\begin{array} { c c c } & \text { Controls are implemented} & \text { Operating effectiveness of } \\& &\text { controls}\\\end{array}$ A- $\begin{array} { c c c } \quad\quad\quad\quad\quad\quad\text { Yes } &\quad\quad\quad\quad \quad\quad\quad\text { Yes } \\\end{array}$ B- $\begin{array} { c c c }\quad\quad\quad\quad\quad\quad \text { Yes } &\quad\quad\quad\quad\quad\quad\quad \text { No } \\\end{array}$ C- $\begin{array} { c c c } \quad\quad\quad\quad\quad\quad\text {No} & \quad\quad\quad\quad\quad\quad\quad\text { Yes } \\\end{array}$ D- $\begin{array} { c c c }\quad\quad\quad\quad\quad\quad \text { No } &\quad\quad\quad\quad \quad\quad\quad\text { No }\end{array}$

The program flowcharting symbol representing a decision is a:

When performing an audit of internal control under PCAOB requirements,auditors evaluate control: $\begin{array} { c c c } & \text { Design Effectiveness } & \text { Operating Effectivenes:} \\\end{array}$ A- $\begin{array} { c c c } \quad\quad\quad\quad\quad\quad\text { Yes } &\quad\quad\quad\quad \quad\quad\quad\text { Yes } \\\end{array}$ B- $\begin{array} { c c c }\quad\quad\quad\quad\quad\quad \text { Yes } &\quad\quad\quad\quad\quad\quad\quad \text { No } \\\end{array}$ C- $\begin{array} { c c c } \quad\quad\quad\quad\quad\quad\text {No} & \quad\quad\quad\quad\quad\quad\quad\text { Yes } \\\end{array}$ D- $\begin{array} { c c c }\quad\quad\quad\quad\quad\quad \text { No } &\quad\quad\quad\quad \quad\quad\quad\text { No }\end{array}$

External auditors should consider the work of internal auditors in their assessment of control risk. a.Are internal auditors independent of management? Explain. b.What is the difference between the primary objective of the external auditors and that of internal auditors? Explain. c.Discuss the factors that should be considered by the external auditors in deciding how much,if any,reliance should be placed on the work of the internal auditors.

A primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with ________.

On financial statement audits,it is required that the auditors obtain an understanding of internal control,including:

When obtaining an understanding of internal control relevant to planning of a financial statement audit,the auditor should obtain adequate knowledge about the ________.