Assessment of Control Risk
Which of the following is ordinarily considered a test of
internal control procedures?
Send confirmation letters to banks.
Count and list cash on hand.
Examine signatures on checks.
Internal Control and Computer Based Information
In the weekly computer run to prepare payroll checks, a
check was printed for an employee who had been
terminated the previous week. Which of the
controls, if pro
DAVID N. RICCHIUTE
University of Notre Dame
1. To become a Certified Public Accountant (CPA), an
individual must pass the Uniform CPA Examination and
a. Demonstrate his or her independence.
Operational and Governmental Compliance Auditing
In a broad sense, society benefits from internal auditing
because the internal auditor
Encourages corporate compliance with standards of
Promotes the efficient and e
Other Assurance Services
1. A study and evaluation of internal control made in
connection with an annual audit is usually not sufficient
to express an opinion on an entity's internal control
Weaknesses in the system may go unno
An auditor would issue an adverse opinion if
The audit was begun by other independent auditors who
withdrew from the engagement.
A qualified opinion cannot be given because the
auditor lacks independence.
Substantive Audit Testing: Financing and
Which of the following expressions is least likely to be
included in a client's representation letter?
No events have occurred subsequent to the balance sheet
date that requir
Substantive Audit Testing:
Auditor confirmation of accounts payable balances at the
balance sheet date may be unnecessary because
This is a duplication of cutoff tests.
Accounts payable balances at the balance s
Statistical Sampling for Substantive Testing
In applying variables sampling, an auditor attempts to
Estimate a qualitative characteristic of interest.
Determine various rates of occurrence for specified
Statistical Sampling for Testing Control
Auditors who prefer statistical sampling to non-statistical
sampling may do so because statistical sampling helps the
Measure the sufficiency of the evidential matter
The basic concept of internal control which recognizes that
the cost of internal control should not exceed the benefits
expected to be derived is known as
Management by exception.
Audit Risk and Materiality
An auditor compares 2002 revenues and expenses with those
the prior year and investigates all changes exceeding
10%. By this procedure the auditor would be most likely to
An increase in prope
Audit Evidence and Audit Programs
The permanent file section of the working papers that is
kept for each audit client most likely contains
Review notes pertaining to questions and comments
regarding the audit work performed.
Maintaining Professional Responsibility:
Regulation and Legal Liability
A CPA firm studies its personnel advancement experience to
ascertain whether individuals meeting stated criteria are
assigned increased degrees of responsibility.
Defining Professional Responsibility:
Quality Standards and Ethics
Which of the following did not result at least partially due
to the alleged audit failures of the 1980s and 1990s?
The Treadway Report.
An SAS further defin
Auditing, Attestation, and Assurance
The single feature that most clearly distinguishes auditing,
attestation, and assurance is
Type of service.
Training required to perform the service.
Scope of services.
CPAs approach to the service.
In addition to assessing the fairness of the entity's
financial statements, a governmental financial statement
audit is concerned with evaluating
a. Internal control.
2. Statement on Auditing St
1. Which of the following is generally more important in a
review than in a compilation?
a. Determining the accounting basis on which the
financial statements are to be presented.
1. An auditor accepted an engagement to audit the 2002
financial statements of EFG Corporation and began the
fieldwork on September 30. EFG gave the auditor the 2002
financial statements on January 17, 2003. The auditor
completed the fieldwor
1. A company holds bearer bonds as a short-term investment.
Responsibility for custody of these bonds and submission
of coupons for periodic interest collections probably
should be delegated to the
a. Chief accountant.
b. Internal auditor.
1. To strengthen
control procedures over the custody of
heavy mobile equipment, the client would most likely
institute a policy requiring a period
a. Increase in insurance coverage.
b. Inspection of equipment and reconciliation with
1. An auditor will ordinarily determine whether payroll
checks are properly endorsed during the testing of
a. Time cards.
b. The voucher system
c. Cash in bank.
d. Accrued payroll.
2. Which of the following control procedures could best
1. When an auditor selects a sample of items from the
vouchers payable register for the last month of the
period audited, and traces the items to underlying
documents, the auditor is gathering evidence primarily in
support of the assertion th
1. A client erroneously recorded a large purchase twice.
Which of the following control procedures would most
likely detect this error in a timely and efficient
a. Footing the purchases journal.
b. Reconciling vendor's monthly stateme
1. A sales cutoff test of billings complements tests of
a. Sales returns.
c. Accounts receivable.
d. Sales allowances.
2. An auditor should perform alternative procedures to
substantiate the existence of accounts rec
1. In assessing sampling risk, the risk of incorrect
rejection and the risk of assessing control risk too high
related to the
a. Efficiency of the audit.
b. Effectiveness of the audit.
c. Selection of the sample.
d. Audit quality control.
1. The application of statistical sampling techniques is
least related to which of the following generally
accepted auditing standards?
a. The work is to be adequately planned and assistants,
if any, are to be properly supervised.
b. In all ma
1. In general, a material weakness in internal control may
be defined as a condition in which material errors or
irregularities may occur and not be detected within a
timely period by
a. An independent auditor during tests of controls.
1. Of the following, which is the least persuasive type of
a. Documents mailed by outsiders to the auditor.
b. Correspondence between auditor and vendors.
c. Copies of sales invoices inspected by the auditor.
d. Computations ma