Chapter 7

Management of Warren Company has decided to respond to a particular risk by hedging the risk with futures contracts. This is an example of :

Avoidance

When a CPA decides that the work performed by internal auditors may have an effect on the nature timing and extent of the CPAS, the CPA should consider the competence and objectivity of the internal auditors. Relative to objectivity, the CPA should:

Consider the organizational level to which the internal auditors report the results of their work.

A primary objective of procedures performed to obtain an understanding of internal control is to provide the auditors with

Knowledge necessary to determine the nature timing and extent of further audit procedures

An entity's ongoing monitoring activities often include

Management review of weekly performance reports

An auditor may compensate for a weakness in internal control by increasing the extent of

Substantive tests of details

Which of the following would be least likely to be considered an objective of internal control?

detecting management fraud

Effective internal control in a small company that has an insufficient number of employees to permit proper separation of responsibilities can be improved by

direct participation by the owner in key record keeping control activities of the business

Which of the following is not an advantage of establishing an enterprise risk management system within an organization

eliminates all risks

The have an adequate basis to issue a management report on internal control under section 404 of the sarbanes oxley act management must do all of the following except :

establish internal control with no material weakness

Controls over financial reporting are often classified as preventative, detective or corrective. Which of the following is an example of detective control?

preparing bank reconciliations

When the auditors are performing a first time internal control audit in accordance with the sarbanes oxley act and PCAOB standards they should

test controls for all significant accounts.

Which of the following symbols indicate that a file has been consulted

trapezoid to a triangle with a <-> in between it