Chapter 6 Performing an Int - Chapter 6 Performing an...

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Chapter 6: Performing an Integrated Audit Chapter 6: Performing an Integrated Audit Student: ___________________________________________________________________________ 1. A company with a strong control environment demonstrates a culture of high integrity and ethics. True False 2. The requirement to report on internal control placed on public companies resulted from one particular type of internal control breakdown: front line employees of some major public companies overrode their control systems and issued misleading financial statements. True False 3. During the course of the audit, the auditor should continually gather and update information on business risk, including the identification of any fraud risk factors noted during preliminary audit planning. True False 4. The auditor should not attempt to analyze potential management motivations to misstate account balances since auditor is an accounting expert and not expected to perform behavioral assessments. True False 5. Substantive procedures performed by the auditor will include procedures to address fraud risks. True False 6. Recent research by COSO reinforces the concept that the control environment is not a very important factor associated with fraud True False
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7. A material weakness in internal control is a deficiency in the design or operation of the control that adversely affects the company’s ability to initiate, record, process or report external financial data reliably in accordance with GAAP. True False 8. The concept of reasonable assurance regarding controls recognizes that the benefits of internal controls should not exceed the cost. True False 9. The auditor is required to report material weaknesses in internal control to the audit committee. True False 10. In an integrated audit both management and the auditor are required to report on the fairness of the internal control of the company. True False 11. The purpose of tests of controls is to determine that account balances are properly stated. True False 12. The purpose of the auditor consideration of the strength of internal controls is to determine the nature, extent and timing of substantive testing. True False 13. Pervasive controls are those that affect the processing of specific computer applications of the client. True False 14. In an integrated audit the auditor is responsible to only form an opinion on the fairness of the financial statements. True False 15. If the auditor finds material weaknesses in the internal controls of the client a qualified report would be issued. True False
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16. The auditor’s report on the internal controls and the financial statements of the client are required to be reported in the same report. True False 17. The major changes in guidance since the original issuance of AS 2 include encouragement to both management and auditors to implement a top down, risk-based approach.
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