Audit Chap. 7

e. At the completion of the audit, the auditors are least likely to know:

Actual control risk.

b. Which of the following is least likely to be a test of controls?

Observation of confirmations.

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

Detecting management fraud.

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Monitoring

Ongoing and separate evaluations

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

Preparing bank reconciliations.

I. 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.

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

trapezoid to a triangle

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Walk-through

Determine implementation

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Flowchart

Documentation

c. Tests of controls ordinarily are designed to provide evidence of:

Operating effectiveness.

k. To have an adequate basis to issue a management report on internal control under Section 404(a) of the Sarbanes-Oxley Act, management must do all of the following, except:

Establish internal control with no material weakness.

a. Tests of controls do not address:

How controls were originated.

c. 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.

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Dual signatures for checks.

Preventive

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Performance review

Comparison of actual performance to expectations

g. When a CPA decides that the work performed by internal auditors may have an effect on the nature, timing, and extent of the CPA's procedures, 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.

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Annual physical inventory.

Detective

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Internal audits of payroll.

Detective

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Management review of budget/actual information.

Detective

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Monthly reconciliation of bank accounts.

Detective

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Control activities

Policies and procedures to mitigate risks

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Segregation of duties over purchasing.

Preventive

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Reasonable assurance

Relationship of costs and benefits

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Risk assessment

Risk responses

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Control environment

Tone at the top

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Adjustment of perpetual inventory records to physical counts.

Corrective

b. An entity's ongoing monitoring activities often include:

Management review of weekly performance reports.

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

Substantive tests of details.

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

Confirmation.

h. 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 and control activities of the business.

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

Eliminates all risks.

You are performing an audit of Western Electronics Corporation and evaluating various controls. Classify the following controls as being primarily preventive, detective, or corrective. Supervisory approval of time cards.

Preventive

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Less severe than a material weakness

Significant deficiency

Auditors should have an understanding of the various terms that relate to their consideration of internal control of an organization. For each term presented below, select the category that most clearly defines or includes the term. The categories may be selected once, more than once, or not at all. Operating effectiveness

Test of controls

d. The preliminary assessments of control risk are often referred to as:

The planned assessed level of control risk.