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Unformatted text preview: 1. Directors, management, external auditors, and
internal auditors all play important roles in creating proper control processes. Senior management is
primarily responsible for A. Establishing risk management and control
processes. B. Reviewing the reliability and integrity of
financial and operational information. C- Ensuring that external and internal auditors oversee the administration of risk management
and control processes. D. implementing and monitoring controls
designed by the board of directors. 2. in an audit of financial statements, an auditor’s
primary consideration regarding a control is whether it A. Reﬂects management's philosophy and
operating style. B. Affects management’s financial statement
assertions. C. Provides adequate safeguards over access to
assets. D. Enhances management's decision-making
processes. 4. The prin‘iarjrir reason to establish internal control
is to - A. Safeguard the resources of the organization. B. Provide reasonable assurance that the
objectives of the organization are achieved. C. Encourage compliance with organizational
objectives. D. Ensure the accuracy, reliability, and timeliness
of information. M15“. 1 8. Which of the following statements about internal
control is true? A. Properly maintained internal controi reasonably ensures that collusion among employees
cannot occur. B. The establishment and maintenance of internal
control are important responsibilities of the internal auditor. C. Exceptionally effective internal control is
enough for the auditor to eliminate substantive
tests on a significant account balance. D. The cost~benefit relationship is a primary
criterion that should be considered in designing internal control. "“h-n 15. Which of the following best describe the
interrelated components of internal control? A. Organizational structure, management
' philosophy, and planning. El. Control environment, risk assessment, control
activities, information and communication
systems, and monitoring. C. Risk assessment, backup facilities,
responsibility accounting, and natural laws. D. Legal environment of the firm, management
philosophy, and organizational structure. w. 41. The following are steps in the financial statement
audit process: l. Prepare flowchart ||. Gather exhibits of all documents
iii. 1 interview personnel The most logical sequence of steps is A. I, II, III.
B. I, ill, II.
C. III, II, l.
D. II, I, Ill. 49. When assessing control risk, an auditor is required to document the auditor’s understanding of
the i. Entity’s control activities that help ensure
management directives are carried out. II. Entity’s control environment factors that help the
auditor plan the engagement. A. i only.
E. II only.
(3. Both land it. D. Neither i nor Ii. \ 50.. Which of the following is not a medium that can normally be used by an auditor to record information
concerning a client’s internal control? A. Narrative memorandum.
E. Procedures manual.
(3. Flowchart. D. Checklists. “‘3 15. Firms subject to the reporting requirements of
the Securities Exchange Act of 1934 are required by
the Foreign Corrupt Practices Act of '1 977 to maintain
satisfactory internal control. Moreover. the Sarbanes- Oxley Act of 2002 requires that annuai reports include
(1} a statement of management’s responsitoilitjl,‘r for
establishing and maintaining adequate internal control
and procedures for financial reporting, and ‘ (2) management's assessment of their effectiveness.
The role of the registered auditor in this process is to A. Disctaim an opinion on the assessment of
controls- 8. Fleport clients with unsatisfactory internal-
control to the SEC. C. Express an opinion on whether the client is
subject to the Securities Exchange Act of
1934. D. Express an opinion on the effectiveness of
internal control over financial reporting. \17. The Sarbanes-Oxley Act of 2002 (80X) requires
management of issuers to do all of the following exce pt A. Establish and document internal control
procedures and to include in their annual reports a report on the company’s internal
control over financial reporting. B. Provide a report to include a statement of
management's responsibility for and
assessment of internal control. C. Provide an identification of the framework used
to evaluate the effectiveness of internal control. D. Provide a statement that the board approves
changes in internal control procedures. 19. Which of the following best describes a CPA’s
engagement to report on an entity‘s internal control
over financial reporting? A- 21. An attest engagement that results In issuance
of an examination report relating to the
effectiveness of internal control. An audit of the financial statements that results
in communicating significant deﬁciencies in
internal control. A prospective engagement to project, for a
period of time not to exceed one year, and
report on the expected benefits of the entity‘s internal control. A consulting engagement to provide
constructive advice to the entity on its internal
control. A practitioner may accept an engagement to * examine the effectiveness of a nonissuer‘s internal control over financial reporting in effect As of a During a Specified
Specified Date Period of Time
A. Yes Yes
B. Yes No
C. No Yes -
D. No No ...
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This note was uploaded on 12/02/2011 for the course ACTG 435 taught by Professor Abelgalvan during the Spring '10 term at University of Illinois at Springfield.
- Spring '10