ch07 - Audit Planning-Assessment of Control Risk.doc -...

Chapter 7 Audit Planning: Assessment of Control Risk
Audit Planning: Assessment of Control Risk
MULTIPLE CHOICE:
1. Which of the following is ordinarily considered a test of
internal control procedures?
a. Send confirmation letters to banks.
b. Count and list cash on hand.
c. Examine signatures on checks.
d. Obtain or prepare reconciliations of bank accounts as
of the balance sheet date.
ANSWER: C
2. When obtaining an understanding of an entity's control
environment, an auditor should concentrate on the substance
of management's policies and procedures rather than their
form because
3. After the study and evaluation of a client's internal
control policies and procedures has been completed, an
auditor might decide to
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Chapter 7 Audit Planning: Assessment of Control Risk
4. A conceptually logical approach to the auditor's evaluation
of internal accounting control consists of the following
four steps:
I. Determine whether the necessary procedures are
prescribed and are being followed satisfactorily.
II. Consider the types of errors and fraud that could
occur.
III. Determine the internal control policies and procedures
that should prevent or detect errors and fraud.
IV. Evaluate any weakness to determine its effect on the
nature, timing, or extent of auditing procedures to be
applied and suggestions to be made to the client.
What should be the order in which these four steps are
performed?
a. III, IV, I, II
b. III, I, II, IV
c. II, III, I, IV
d. II, I, III, IV
ANSWER: C