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29) Proper segregation of functional responsibilities calls for separation of:A) authorization, execution, and payment.B) authorization, recording, and custody.C) custody, execution, and reporting.D) authorization, payment, and recording.Answer: B30) Which of the following groups establishes and maintains the company's internal controls?31) If a company has an effective internal audit department:32) Hanlon Corp. maintains a large internal audit staff that reports directly to the accounting department. Audit reports prepared by the internal auditors indicate that the system is functioning as it should and that the accounting records are reliable. An independent auditor will probably:33) To obtain 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:A) management may establish appropriate policies and procedures but not act on them.B) the board of directors may not be aware of management's attitude toward the control environment.C) the auditor may believe that the policies and procedures are inappropriate for that particular entity.D) the policies and procedures may be so weak that no reliance is contemplated by the auditor.Answer: A34) When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be:
35) The purpose of phase 3 in the "process for understanding internal control and assessing control risk" is to:*A) design, perform and evaluate tests of controls.B) obtain and document an understanding of internal control design an operation.C) assess control risk.D) decide planned detection risk and substantive tests.