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tif_ch10 - CHAPTER 10 Multiple-Choice Questions 1 easy a...

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CHAPTER 10 Multiple-Choice Questions 1. Which of the following parties is responsible for establishing an entity’s internal controls? easy a. Management. a c. Auditors. b. Management and auditors. d. Committee of Sponsoring Organizations. 2. For an internal audit function to be effective, it is essential that the internal audit staff easy a. be independent of the operating departments. d b. be independent of the accounting department. c. report directly to a high level of authority within the organization such as the audit committee. d. achieve all of the above. 3. Management is often unwilling to implement an ideal system of internal controls because easy b 4. Internal controls can never be considered as absolutely effective because easy a 5. easy A major control available in a small company, which might not be feasible in a large company, is D 6. easy An auditor’s attempt to gain an understanding of the accounting system is typically accomplished and documented by d a. a narrative description of the system. b. a flowchart. c. a questionnaire. d. using any of the above. 7. easy When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, this is referred to as c 10-1
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8. Control risk is a measure of the auditor’s expectation that the internal controls easy a. will prevent material misstatements from occurring. d b. will detect material misstatements. c. will either prevent material misstatements or detect them. d. will neither prevent material misstatements nor detect them. 9. easy The procedures to test effectiveness of control policies and procedures in support of a lower assessment of control risk are called a
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