CH 10 CPA Adapted Questions - 1. Directors, management,...

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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.

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