Chapter10 - final - CHAPTER 10 Multiple-Choice Questions 1....

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CHAPTER 10 Multiple-Choice Questions 1. Which of the following is responsible for establishing a private company’s internal control? easy a. Management. a b. Auditors. c. Management and auditors. d. Committee of Sponsoring Organizations. 2. Which of the following is not one of the three primary objectives of effective internal control? easy a. Reliability of financial reporting d b. Efficiency and effectiveness of operations c. Compliance with laws and regulations d. Assurance of elimination of business risk. 3. (Public) The Public Company Accounting Oversight Board states that reasonable assurance allows a: easy a. small likelihood of ineffective internal controls. b b. remote likelihood that material misstatements will not be prevented or detected by internal control. c. likelihood that material misstatements will not be prevented or detected by internal control. d. high likelihood that material misstatements will not be prevented or detected by internal control. 4. easy Two key concepts that underlie management’s design and implementation of internal control are: c a. costs and materiality. b. absolute assurance and costs. c. inherent limitations and reasonable assurance. d. none of the above. 5. Internal controls can never be considered as absolutely effective because: easy a. their effectiveness is limited by the competency and dependability of employees. a b. controls always have inherent weaknesses that can be exploited. c. controls are designed to prevent and detect only material misstatements. d. none of the above. 6. A major control available in a small company, which might not be feasible in a big company, is: easy a. a wider segregation of duties. d b. a voucher system. c. fewer transactions to process. d. the owner-manager’s personal interest and close relationship with personnel. 7. (Public) Which of the following is responsible for establishing internal controls for a public company? easy a. Management. a b. Financial statement auditors. c. Management and auditors. d. Committee of Sponsoring Organizations. 10-1
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8. easy Which of the following parties provides an assessment of the effectiveness of internal control over financial reporting for public companies? c a. Management. b. Financial statement auditors. c. Management and the financial statement auditors. d. Committee of Sponsoring Organizations. 9. An act of two or more employees to steal assets or misstate records is frequently referred to as: easy a. collusion. a b. a material weakness. c. a control deficiency. d. Any of the above. 10. easy When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be: c a. tracing. b.
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Chapter10 - final - CHAPTER 10 Multiple-Choice Questions 1....

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