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10) Management must disclose material weaknesses in internal control in its audit report: A) whenever the weakness is deemed significant to a single class of transactions.B) whenever the weakness is significant to overall financial reporting objectives.C) if the weakness exists at the end of the year.D) only if the auditor identifies the weakness as significant.Answer: CTerms: Material weaknesses in internal controlDiff: ModerateObjective: LO 10-2AACSB: Reflective thinking skillsTopic: Public6
11) In performing the audit of internal control over financial reporting the auditor emphasizes internal control over class of transactions because:12) Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the:13) When considering internal controls, an important point to consider is that:7
14) Of the following statements about internal controls, which one is least likely to be correct?A) No one person should be responsible for the custodial responsibility and the recording responsibility for an asset.B) Transactions must be properly authorized before such transactions are processed.C) Because of the cost-benefit relationship, a client may apply controls on a test basis.D) Control procedures reasonably ensure that collusion among employees cannot occur.Answer: DTerms: Internal controlsDiff: ModerateObjective: LO 10-2AACSB: Reflective thinking skills