Question 1

Which of the following is true of generalized audit software packages?

Accepted Answer

A)   They can be used only in auditing online computer systems.
B)   They can be used on any computer without modification.
C)   They each have their own characteristics that the auditor must carefully consider before using in a given audit situation.
D)   They enable the auditor to perform all manual test procedures less expensively.E) B) and D)
F) A) and C)

Question 2

ACL is an example of

Accepted Answer

A)   An EDI software package.
B)   An IT software package.
C)   Software that allows auditors to retrieve and evaluate data from client systems.
D)   A type of networking.E) B) and D)
F) None of the above

Question 3

AS5 requires that the auditor appropriately document the processes,procedures,judgments,and results relating to the audit of internal control.Specifically,what must this documentation include?

Accepted Answer

The auditor's documentation must include...

Question 4

When an auditor tests a computerized accounting system,which of the following is true of the test data approach?

Accepted Answer

A)   Test data are processed by the client's computer programs under the auditor's control.
B)   Test data must consist of all possible valid and invalid conditions.
C)   Testing a program at year end provides assurance that the client's processing was accurate for the full year.
D)   Several transactions of each type must be tested.E) B) and C)
F) C) and D)

Question 5

You are an experienced audit senior.The new staff accountant on your audit team does not understand what a control deficiency is.Give him a definition of "control deficiency." Include examples of two types of control deficiencies.

Accepted Answer

A control deficiency exists when the des...

Question 6

Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:

Accepted Answer

A)   Reasonable assurance on the financial statements, absolute assurance on internal control.
B)   Reasonable assurance on internal control, absolute assurance on the financial statements.
C)   Absolute assurance on both the financial statements and internal control.
D)   Reasonable assurance on both the financial statements and internal control.E) C) and D)
F) None of the above

Question 7

Which of the following statements is false?

Accepted Answer

A)   The PCAOB focuses on the financial reporting objective of internal controls.
B)   Management is required to base internal controls on a recognized control framework.
C)   Most U.S. companies use the internal control framework developed by COSO in the early 1990s.
D)   All controls relevant to financial reporting are accounting controls.E) B) and D)
F) A) and B)

Question 8

In order for an external auditor to complete an audit of a public company,the entity's management must comply with all of the following except:

Accepted Answer

A)   Accept responsibility for the effectiveness of the entity's internal control over financial reporting.
B)   Evaluate the effectiveness of the entity's internal control over financial reporting using suitable control criteria.
C)   Support its evaluation with sufficient evidence, including documentation.
D)   Present an oral assessment of the effectiveness of the entity's internal control over financial reporting as of the end of the entity's most recent fiscal year.E) A) and B)
F) None of the above

Question 9

Which of the following is least likely to represent a material weakness in internal control for Flynt Corporation?

Accepted Answer

A)   Flynt Corporation's computer systems were not working properly for two days; consequently, employees needed to do all reconciliations manually.
B)   Flynt Corporation's CFO was arrested last year for embezzling money from the company.
C)   For the current year, the auditor found a material misstatement in Flynt's sales recognition that was undetected by the internal controls.
D)   Flynt's audit committee is deemed to be ineffective.E) B) and D)
F) B) and C)

Question 10

In a public company,management must assess and report on internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 11

In a public company,management's report on internal control must be signed by the members of the audit committee.

Accepted Answer

A) True 
 B)False

Question 12

In determining the extent to which the auditor may use the work of others in the audit of ICFR,the auditor should do all of the following except:

Accepted Answer

A)   Test some of the work performed by others to evaluate the quality and effectiveness of their work.
B)   Evaluate the nature of the controls subjected to the work of others.
C)   Evaluate the competence and objectivity of the individuals who performed the work.
D)   All of the above are required.E) All of the above
F) A) and D)

Question 13

To obtain an understanding of significant processes and relevant subprocesses,auditors would be least likely to use which of the following techniques?

Accepted Answer

A)   Reviewing management documentation.
B)   Inquiry.
C)   Scanning.
D)   Transaction walkthroughs.E) B) and D)
F) All of the above

Question 14

Which of the following is true regarding management's documentation of internal controls?

Accepted Answer

A)   Some documentation should focus on controls designed to detect fraud.
B)   Documentation should focus on controls over the interim financial reporting process.
C)   Documentation must be done on paper.
D)   Inadequate documentation is usually considered an insignificant deficiency in internal control.E) B) and D)
F) None of the above

Question 15

Identify indicators of a material weakness in internal control over financial reporting.

Accepted Answer

Indicators of a material weakness in ICF...

Question 16

An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means

Accepted Answer

A)   The auditor must consider the integrated thoughts and ideas of everyone on the audit staff.
B)   The auditor must conduct two audits, one on the effectiveness of internal control and one on the financial statements, in an integrated way.
C)   The auditor must integrate the same objectives whether auditing internal control or auditing the financial statements.
D)   Two independent CPA firms must work together on the audit.E) A) and B)
F) A) and C)

Question 17

When auditing a public company,the auditor must form an opinion on the effectiveness of internal control over financial reporting,or issue a disclaimer in the event of a scope limitation.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is an advantage of generalized computer audit packages?

Accepted Answer

A)   They are all written in one identical computer language.
B)   They can be used for audits of clients that use differing IT equipment and file formats.
C)   They have reduced the need for the auditor to study input controls for IT-related procedures.
D)   Their use can be substituted for a relatively large part of the required compliance testing.E) A) and B)
F) None of the above

Question 19

When testing a computerized accounting system,which of the following is false regarding the test data approach?

Accepted Answer

A)   The test data need to consist of only those valid and invalid conditions in which the auditor is interested.
B)   Only one transaction of each type needs be tested.
C)   Test data are processed by the client's computer programs under the auditor's control.
D)   The test data must consist of all possible valid and invalid conditions.E) All of the above
F) A) and C)

Question 20

Management documentation should include all of the following except:

Accepted Answer

A)   Documentation regarding the auditor's evaluation of internal controls.
B)   Documentation regarding management's testing and evaluation of the controls.
C)   Documentation regarding the safeguarding of assets.
D)   Documentation on the controls designed in all five components of internal control.E) C) and D)
F) B) and D)

Exam 7: Auditing Internal Control Over Financial Reporting

In determining the extent to which the auditor may use the work of others in the audit of ICFR,the auditor should do all of the following except:

Correct AnswerverifiedShow Answer

When testing a computerized accounting system,which of the following is false regarding the test data approach?

Correct AnswerverifiedShow Answer

When auditing a public company,the auditor must form an opinion on the effectiveness of internal control over financial reporting,or issue a disclaimer in the event of a scope limitation.

Correct AnswerverifiedShow Answer

In a public company,management must assess and report on internal control over financial reporting.

Correct AnswerverifiedShow Answer

In order for an external auditor to complete an audit of a public company,the entity's management must comply with all of the following except:

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

ACL is an example of

Correct AnswerverifiedShow Answer

Which of the following is true regarding management's documentation of internal controls?

Correct AnswerverifiedShow Answer

AS5 requires that the auditor appropriately document the processes,procedures,judgments,and results relating to the audit of internal control.Specifically,what must this documentation include?

Correct AnswerverifiedThe auditor's documentation must include...View AnswerShow Answer

Which of the following is least likely to represent a material weakness in internal control for Flynt Corporation?

Correct AnswerverifiedShow Answer

Identify indicators of a material weakness in internal control over financial reporting.

Correct AnswerverifiedIndicators of a material weakness in ICF...View AnswerShow Answer

In a public company,management's report on internal control must be signed by the members of the audit committee.

Correct AnswerverifiedShow Answer

Which of the following is true of generalized audit software packages?

Correct AnswerverifiedShow Answer

You are an experienced audit senior.The new staff accountant on your audit team does not understand what a control deficiency is.Give him a definition of "control deficiency." Include examples of two types of control deficiencies.

Correct AnswerverifiedA control deficiency exists when the des...View AnswerShow Answer

When an auditor tests a computerized accounting system,which of the following is true of the test data approach?

Correct AnswerverifiedShow Answer

Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following:

Correct AnswerverifiedShow Answer

Which of the following is an advantage of generalized computer audit packages?

Correct AnswerverifiedShow Answer

Management documentation should include all of the following except:

Correct AnswerverifiedShow Answer

To obtain an understanding of significant processes and relevant subprocesses,auditors would be least likely to use which of the following techniques?

Correct AnswerverifiedShow Answer

An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The auditor's documentation must include...
View Answer

Correct Answer
verified

Correct Answer
verified
Indicators of a material weakness in ICF...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A control deficiency exists when the des...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified