This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

Chapter 5: Internal Control over Financial Reporting Chapter 5: Internal Control over Financial Reporting Student: ___________________________________________________________________________ 1. Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and ineffective and inefficient operations. True False 2. Auditing standards require that the auditor exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit. True False 3. If internal controls are not enforced they are useless and can lead to waste and fraud. True False 4. If an organization is too lenient in its treatment of employees who committed fraud, the control environment will be seen as stronger than if the treatment were harsher. True False 5. Weakness in the tone at the top have been associated with most financial frauds during the past decade. True False 6. Virtually all major financial frauds from the past decade were associated with organizations that had weaknesses in the control environment True False 7. Internal control is a process designed to provide reasonable assurance regarding the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and effective and efficient operations, and safeguarding of the assets. True False 8. The quality of an organization's internal control will affect both the audit approach and the amount of testing needed for an engagement. True False 9. Control activities are the policies and procedures that are established to assist in accomplishing objectives and to mitigate risks. True False 10. Computer controls that are pervasive and affect every computerized system are referred as application controls. True False 11. Control is considered to be part of corporate governance. True False 12. Good control means that risks are identified and dealt with effectively. True False 13. Investors do not place much value on the internal control of the companies in which they invest. True False 14. The PCAOB, in Auditing Standard No. 5, indicates that auditors should use a bottom-up approach that begins at the financial statement level. True False 15. Internal control is applied across all activities of the organization. True False 16. The more effective the quality of internal control, the lower the control risk. True False 17. The five major components of an organization's internal control are: the control environment, risk assessment, control activities, information and communication, and materiality. True False 18. A company's internal auditing practices should not be considered when assessing control risk. ... View Full Document

End of Preview

Sign up now to access the rest of the document