Gleim 5.3

In obtaining an understanding of internal control, the auditor may trace several transactions through the control process, including how the transactions interface with any service organizations whose services are part of the information system. The primary purpose of this task is to

Determine whether the controls have been implemented.

In an audit of financial statements in accordance with generally accepted auditing standards, an auditor should

Document the auditor's understanding of the entity's internal control.

Which of the following factors is least likely to affect the extent of the auditor's understanding of the entity's internal controls?

The amount of time budgeted to complete the engagement.

The primary purpose of obtaining an understanding of the entity and its environment, including its internal control, is to provide an auditor with

A frame of reference within which to plan the audit.

The auditor's understanding of internal control is documented to substantiate

Compliance with generally accepted auditing standards.

After obtaining an understanding of the entity and its environment, including its internal control, the auditor assesses

Control risk and inherent risk to determine the acceptable level of detection risk

In obtaining an understanding of controls that are relevant to audit planning, an auditor is required to obtain knowledge about the

Design of the controls included in the internal control components.

An auditor uses the audit evidence provided by the understanding of internal control and the assessment of the risks of material misstatement to determine the nature, timing, and extent of

Further audit procedures.

Which of the following types of control best describes procedures to ensure appropriate systems software acquisition?

General.

A conceptually logical approach to the auditor's consideration of relevant controls consists of the following four steps: Determine whether the relevant controls are capable of preventing, or detecting and correcting, material misstatements and have been implemented. Evaluate the operating effectiveness of relevant controls. Assess the risks of material misstatement. Design further audit procedures. What is the most logical order in which these four steps are performed?

I, III, IV, II.

Which of the following is the most logical order of performing steps I through III below? Tests of controls Understanding of internal control Substantive procedures

II, I, III.

The following are steps in the financial statement audit process: Prepare flowchart Gather exhibits of all documents Interview personnel The most logical sequence of steps is

III, II, I.

In planning an audit, the auditor's knowledge about the design of relevant controls should be used to

Identify the types of potential misstatements that could occur.

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Implemented.

For the audit of a nonissuer, the primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with

Knowledge necessary to plan the audit.

According to AU-C 315, Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement, not all controls are relevant to a financial statement audit. Which one of the following would most likely be considered in an audit?

Maintenance of control over unused checks.

When obtaining an understanding of an entity's control environment, an auditor should concentrate on the substance of controls rather than their form because

Management may establish appropriate controls but not act on them.

When obtaining an understanding of an entity's internal control, an auditor should concentrate on their substance rather than their form because

Management may establish appropriate controls but not enforce compliance with them.

The ultimate purpose of understanding internal control is to contribute to the auditor's evaluation of the risk that

Material misstatements may exist in the financial statements.

Which of the following statements regarding auditor documentation of the understanding of the client's internal control components obtained to plan the audit is correct?

No one particular form of documentation is necessary, and the extent of documentation may vary.

Which of the following procedures most likely will provide an auditor with sufficient evidence about whether an entity's controls are suitably designed and have been implemented to prevent, or detect and correct, material misstatements?

Observing the entity's personnel applying the controls.

As part of understanding internal control relevant to the audit of a non issuer, an auditor does not need to

Obtain knowledge about the operating effectiveness of internal control.

The auditor observes client employees while obtaining an understanding of internal control to

Obtain knowledge of the design and implementation of relevant controls.

Which of the following audit techniques ordinarily would provide an auditor with the least assurance about the operating effectiveness of an internal control activity?

Preparation of system flowcharts.

Which of the following is not a medium that can normally be used by an auditor to record information concerning internal control?

Procedures manual.

An auditor should obtain an understanding of an entity's information system, including

Process used to prepare significant accounting estimates.

The auditor should document the understanding of internal control. For example, a narrative memorandum may be used to

Provide a written description of the process and flow of documents and of the control points.

In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would

Review the entity's descriptions of inventory policies and procedures.

In order to obtain an initial understanding of internal control sufficient to assess the risk of material misstatement of the financial statements, an auditor would most likely perform which of the following procedures?

Risk-assessment procedures to evaluate the design of relevant controls.

During consideration of internal control in a financial statement audit, an auditor is not obligated to

Search for significant deficiencies in the operation of internal control.

In obtaining an understanding of internal control in a financial statement audit, an auditor is not obligated to

Search for significant deficiencies in the operation of internal control.

Which of the following factors is most likely to affect the extent of the documentation of the auditor's understanding of a client's system of internal controls?

The degree to which information technology is used in the accounting function.