Audit Ch 6 - Internal Control in a Financial Statement Audit

The tone of a organization is set an the control consciousness of its people is influenced by the ______, Multiple choice question. control environment COSO Framework risk assessment procedures monitoring of controls

control environment

The integrity and ethical values of management personnel heavily influence the ______ of an entity's internal controls. Multiple choice question. effectiveness efficiency accuracy sufficiency

effectiveness

The purpose of the ______ Framework is to help management better control the organization and to provide boards of directors an added ability to oversee internal control. Multiple choice question. COSO PCAOB SEC FASB

COSO

The tone of an organization is set and the foundation for implementing the entity's system of internal control is established by the . (Enter only one word per blank.)

Blank 1: control Blank 2: environment

An important role in how management meets its stewardship or agency responsibilities is played by . (Enter only one word per blank.)

Blank 1: internal Blank 2: control or controls

A direct relationship exists between which reflect what an entity is trying to achieve, which represent what the entity needs to do to achieve them, and the of the entity. (Enter only one word per blank.)

Blank 1: objectives Blank 2: components Blank 3: structure

How authority and responsibility are delegated and monitored and the framework within which the entity's activities for achieving entity wide objectives are planned, executed, controlled and reviewed are defined by the entity's . (Enter only one word per blank.)

Blank 1: organizational Blank 2: structure

To obtain an understanding of the entity's internal controls which helps identify key controls, recognize types of potential misstatements and design test of controls and substantive procedures, auditors use procedures. (Enter only one word per blank.)

Blank 1: risk Blank 2: assessment

True or false: An entity's mix of manual and automated controls varies with the nature and complexity of the entity's use of IT. True false question. True False

True

People that significantly influence the control consciousness of the entity and must take their fiduciary responsibilities seriously and actively oversee the entity's accounting and reporting policies and procedures include the ______. Multiple select question. internal auditors board of directors audit committee external auditors

board of directors audit committee

Factors that can impact the effectiveness of the board of directors or audit committee include ______. Multiple select question. compensation packages experience of members stock performance nature and extent of interactions with auditors information availability

experience of members nature and extent of interactions with auditors information availability

Large public companies are required to engage a(n) auditor to express an opinion as to the effectiveness of their systems of internal control over financial reporting. (Enter only one word per blank.)

external

The extent of an entity's use of ______ can affect internal controls because this function affects the way transactions are initiated, authorized, recorded, processed and reported. Multiple choice question. information technology industry specialists internal auditors managerial estimates

information technology

The components of internal controls as defined by the COSO Framework are ______. Multiple select question. monitoring activities entity's risk assessment information and communication detection activities control environment

monitoring activities entity's risk assessment information and communication control environment

Controls that may be relevant to the audit when they have an impact on data the auditor uses to apply audit procedures include ______ controls. Multiple select question. planning management decision operations compliance

operations compliance

An effective system of internal controls allows management to focus on _____ while maintaining compliance with relevant laws and minimizing surprises. Multiple select question. operations stock price fluctuations financial performance goals compensation maximization

operations financial performance goals

Important components of effective internal controls for an entity include ______. Multiple select question. setting unrealistic performance targets removing performance-dependent rewards a strong internal audit function having an effective board of directors

removing performance-dependent rewards a strong internal audit function having an effective board of directors

The controls that are of most direct relevance to a financial statement audit are those that contribute to financial statement ______. Multiple select question. effectiveness transparency reliability timeliness accuracy

transparency reliability timeliness