Tif_ch10 - CHAPTER 10 Multiple-Choice Questions 1 easy a Which of the following parties is responsible for establishing an entitys internal

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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 a. control failures are infrequent. b b. such a system is too expensive. c. sufficient technology does not exist to afford an ideal system. d. risks are often overstated. 4. Internal controls can never be considered as absolutely effective because easy a a. their effectiveness is limited by the competency and dependability of the company’s personnel. 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. 5. easy A major control available in a small company, which might not be feasible in a large company, is D a. a wider segregation of duties. b. a voucher system. c. fewer transactions to process. d. the owner-manager’s personal interest and close relationship with personnel. 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 a. tracing. b. vouching. c. a walk-through. d. tests of controls. 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 a. tests of controls. b. tests of transactions. c. analytical tests. d. a walk-through. 10. The auditor can conclude that control risk is low easy d a. after obtaining an understanding of the control environment and the accounting system at a fairly detailed level. b. after identifying specific controls that will reduce control risk and making an assessment of control risk. c.
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This note was uploaded on 10/13/2010 for the course ACCOUNTING 25668652 taught by Professor Ommaya during the Spring '10 term at Abraham Baldwin Agricultural College.

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Tif_ch10 - CHAPTER 10 Multiple-Choice Questions 1 easy a Which of the following parties is responsible for establishing an entitys internal

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