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AS part of understanding the internal control structure an auditor is not required to

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AS part of understanding the internal control structure an auditor is not required to
1
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Auditors obtain an understanding of an entity’s internal control for the primary purpose of:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Gathering sufficient appropriate evidence to provide a reasonable basis for an opinion on the financial statements.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Determining the nature, extent and timing of subsequent audit procedures to be performed.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Determining whether interim audit testing is appropriate.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Providing documentary evidence to present to those charged with governance.
AS part of understanding the internal control structure an auditor is not required to
2
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

An auditor’s primary consideration regarding an entity’s internal controls is whether they
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Prevent management override.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Relate to the control environment.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Reflect management’s philosophy and operating style.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Affect the financial statement assertions.
AS part of understanding the internal control structure an auditor is not required to
3
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following statements about internal control is correct?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
A properly maintained internal control system reasonably ensures that collusion among employees cannot occur.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
The establishment and maintenance of internal control is an important responsibility of the internal auditor.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
An exceptionally strong internal control system is enough for the auditor to eliminate substantive procedures on a significant account balance.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
The cost-benefit relationship is a primary criterion that should be considered in designing an internal control system.
AS part of understanding the internal control structure an auditor is not required to
4
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Internal controls are designed to achieve company objectives in all of the following areas except:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Safeguarding of assets.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Reliability of financial reporting.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Reduction of debt financing costs.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Compliance with laws and regulations.
AS part of understanding the internal control structure an auditor is not required to
5
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Internal control is a process designed to provide reasonable assurance regarding the achievement of which objective?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Effectiveness and efficiency of operations.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Reliability of financial reporting.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Compliance with applicable laws and regulations.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
All of the above are correct.
AS part of understanding the internal control structure an auditor is not required to
6
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following is not one of the five major components of internal control?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Risk assessment.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Control activities.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Information and communication.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Human resource background checks.
AS part of understanding the internal control structure an auditor is not required to
7
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Monitoring is a major component of the COSO Internal Control—Integrated Framework. Which of the following is not correct in how the company can implement the monitoring component?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Monitoring can be an ongoing process.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Monitoring can be conducted as a separate evaluation.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Monitoring and other audit work conducted by internal audit staff can reduce external audit costs.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
The independent auditor can serve as part of the entity’s control environment and continuous monitoring.
AS part of understanding the internal control structure an auditor is not required to
8
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following is a proper reason for not conducting tests of controls?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
The internal control structure appears very strong.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
The procedures require more audit effort than the projected benefits to be obtained from lowering the control risk.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
The company does not have any flowcharts of its system available for review.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
The auditor prefers the control risk to be the minimum.
AS part of understanding the internal control structure an auditor is not required to
9
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

After obtaining an understanding of an entity’s internal control system, an auditor may set control risk at high for some assertions because he or she
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Believes the internal controls are unlikely to be effective.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Determines that the pertinent internal control components are not well documented.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Performs tests of controls to restrict detection risk to an acceptable level.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Identifies internal controls that are likely to prevent material misstatements.
AS part of understanding the internal control structure an auditor is not required to
10
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Regardless of the assessed level of control risk, an auditor would perform some
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Tests of controls to determine the effectiveness of internal controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Analytical procedures to verify the design of internal controls.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Substantive procedures to restrict detection risk for material transaction classes.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Dual-purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk.
AS part of understanding the internal control structure an auditor is not required to
11
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

With preliminary control risk assessments set at high, auditors are likely to:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Use a reliance strategy.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Complete little or no tests of controls.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Complete interim testing of account balances.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Test controls extensively.
AS part of understanding the internal control structure an auditor is not required to
12
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following represents the correct sequence of audit steps that come after first obtaining an understanding and documenting the entity’s internal control?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Test of controls, assess control risk, determine extent of substantive tests, reassess control risk.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Assess control risk, test of controls, determine extent of substantive testing, reassess control risk.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Assess control risk, determine extent of substantive testing, test of controls, reassess control risk.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Assess control risk, test of controls, reassess control risk, determine extent of substantive testing.
AS part of understanding the internal control structure an auditor is not required to
13
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

A reliance strategy is chosen when the auditor:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Plans on conducting tests of controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Has set the control risk at a high level.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Has set the control risk at a lower level.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Both A) and C).
AS part of understanding the internal control structure an auditor is not required to
14
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Understanding each of the components of internal control provides knowledge about:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
The design of tests of controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
The assessment of inherent risks.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Factors that affect the risk of material misstatement.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Both A) and C).
AS part of understanding the internal control structure an auditor is not required to
15
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

The effectiveness of internal control is reduced by:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Computerized accounting records.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Flowcharts.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Human errors or mistakes.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Both A) and C).
AS part of understanding the internal control structure an auditor is not required to
16
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following statements regarding auditor documentation of the entity’s internal control is correct?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Documentation must include narrative memorandums.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
No documentation is necessary to satisfy auditing standards, however, oral inquiry is required at minimum.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Internal control questionnaires are specifically tailored to meet the needs of each individual entity.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
The auditor’s assessment of the level of control risk can be documented using a structured working paper, an internal control questionnaire or a memorandum.
AS part of understanding the internal control structure an auditor is not required to
17
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

In order to be able to set control risk at a lower level, the auditor must do all of the following except:
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Identify all general IT controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Identify specific controls that will be relied upon.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Perform tests of controls.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Conclude on the achieved level of control risk.
AS part of understanding the internal control structure an auditor is not required to
18
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Assessing control risk below high involves all of the following except
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Identifying specific controls to rely on.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Concluding that controls are ineffective.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Performing tests of controls.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Analysing the achieved level of control risk after performing tests of controls.
AS part of understanding the internal control structure an auditor is not required to
19
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following audit techniques would most likely provide an auditor with the most assurance about the effectiveness of the operation of a control?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Inquiry of entity personnel.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Reperformance of the control by the auditor.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Observation of entity personnel.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Walk-through.
AS part of understanding the internal control structure an auditor is not required to
20
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

The highest-quality and most reliable audit evidence that segregation of duties is properly implemented is obtained by
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Inspection of documents prepared by a third party but which contain the initials of those applying entity controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Observation by the auditor of the employees performing control activities.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Inspection of a flowchart of duties performed and available personnel.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Inquiries of employees who apply control activities.
AS part of understanding the internal control structure an auditor is not required to
21
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

An auditor may need to obtain a service auditor’s report when an entity receives accounting services such as payroll from a service organization. Which of the following statements is true regarding this service audit report?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
It should include an opinion.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
It provides the client auditor with a guarantee regarding whether the entity’s control procedures have been placed in operation.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
The client auditor need not inquire about the service auditor’s professional reputation.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
The client auditor should perform the procedures at the service organization to verify the information in the report.
AS part of understanding the internal control structure an auditor is not required to
22
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Type 2 reports by the service organization’s auditor typically
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Provide reasonable assurance that their financial statements are free of material misstatements.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Ensure that the entity will not have any misstatements in areas related to the service organization’s activities.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Ensure that the entity is billed correctly.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Assess whether the service organization’s controls are suitably designed and operating effectively.
AS part of understanding the internal control structure an auditor is not required to
23
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Significant deficiencies in internal control are matters that come to an auditor’s attention that should be communicated to those charged with governance because they represent
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Disclosures of information that significantly contradict the auditor’s going concern assumption.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Material fraud perpetrated by high-level management.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Significant deficiencies in the design or operation of the internal control.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Manipulation or falsification of accounting records or documents from which financial statements are prepared.
AS part of understanding the internal control structure an auditor is not required to
24
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

A primary advantage of using generalized audit software packages to audit the financial statements of an entity that uses an IT system is that the auditor may
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Consider increasing the use of substantive tests of transactions in place of analytical procedures.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Substantiate the accuracy of data through self-checking digits and hash totals.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Reduce the level of required tests of controls to a relatively small amount.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Access information stored on computer fi les while having a limited understanding of the entity’s hardware and software features.
AS part of understanding the internal control structure an auditor is not required to
25
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

Which of the following is not considered a general control?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Back up and disaster recovery controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Password protection on the central server.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Reconciliation of payroll record count with the number of active employees.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Requiring change authorization forms on all program software.
AS part of understanding the internal control structure an auditor is not required to
26
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

An auditor anticipates assessing control risk at a low level in an IT environment. Under these circumstances, on which of the following controls would the auditor initially focus?
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Data capture controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Application controls.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Output controls.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
General controls.
AS part of understanding the internal control structure an auditor is not required to
27
AS part of understanding the internal control structure an auditor is not required to
AS part of understanding the internal control structure an auditor is not required to

An auditor’s flowchart of an entity’s accounting system is a diagrammatic representation that depicts the auditor’s
AS part of understanding the internal control structure an auditor is not required to
A)
AS part of understanding the internal control structure an auditor is not required to
Program for tests of controls.
AS part of understanding the internal control structure an auditor is not required to
B)
AS part of understanding the internal control structure an auditor is not required to
Understanding of the system.
AS part of understanding the internal control structure an auditor is not required to
C)
AS part of understanding the internal control structure an auditor is not required to
Understanding of the types of fraud that are probable, given the present system.
AS part of understanding the internal control structure an auditor is not required to
D)
AS part of understanding the internal control structure an auditor is not required to
Documentation of the study and evaluation of the system.

Are auditors required to test internal controls?

22 The auditor must test those entity-level controls that are important to the auditor's conclusion about whether the company has effective internal control over financial reporting.

What is an auditor's responsibility for internal control?

An Internal Auditor's job is to ensure that all the business processes in a company are risk-management compliant. The operating process includes assessing certain areas for compliance with relevant laws and evaluating how effective this department has been at implementing its controls into practices.

When obtaining an understanding of an entity's internal controls An auditor should concentrate on their substance rather than their form because?

The auditor should concentrate on the substance of managcmcnt'3 policies, procedures, and related actions controls rather than their form because management controls may be established appropriate policies and procedures but not acted upon.

When obtaining an understanding of controls relevant to the audit the auditor is required to?

In obtaining an understanding of controls that are relevant to audit planning, the auditor should perform procedures to obtain sufficient knowledge about the design of the relevant controls pertaining to each of the five internal control components and determine whether they have been placed in operation.

part understanding internal control structure auditor required PCAOB internal control

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