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| 1 | |
In comparison to a large public-held company, a small, privately-held entity is more likely to |
| | A) | Lack adequate oral communications. |
| | B) | Lack adequate owner involvement. |
| | C) | Lack segregation of duties. |
| | D) | Have a written summary of all controls. |
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| 2 | |
For non-public companies with preliminary control risk assessments set at the maximum level, auditors are likely to |
| | A) | Use a reliance strategy. |
| | B) | Complete little or no tests of controls. |
| | C) | Complete interim testing of account balances. |
| | D) | Test controls extensively. |
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| 3 | |
Under the 2002 Sarbanes-Oxley Act, reportable conditions must be: |
| | A) | Reported to the audit committee orally or in writing and also documented in the audit workpapers. |
| | B) | Reported to the audit committee orally and in writing. |
| | C) | Reported to senior management and documented in the audit workpapers |
| | D) | Reported to senior management orally and in writing. |
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| 4 | |
Which of the following statements regarding auditor documentation of the client's internal control structure is correct? |
| | A) | Documentation must include narrative memorandums. |
| | B) | No documentation is necessary to satisfy GAAS, however, oral inquiry is required at minimum |
| | C) | Internal control questionnaires are specifically tailored to meet the needs of each individual client |
| | D) | No one particular form of documentation is necessary, and the extent of documentation may vary. |
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| 5 | |
Which of the following is a proper reason for not conducting tests of controls for non-public companies? |
| | A) | The internal control structure appears very strong. |
| | B) | The procedures require more audit effort than the projected benefits to be obtained from lowering the control risk. |
| | C) | The company does not have any flowcharts of their system available for review. |
| | D) | The auditor prefers the control risk to be the minimum |
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| 6 | |
Which of the following is not one of the five major components of internal control? |
| | A) | Risk assessment |
| | B) | Staffing |
| | C) | Control procedures/activities |
| | D) | Information and communication system |
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| 7 | |
Knowledge obtained while gaining an understanding of the five components of internal control is least useful for: |
| | A) | Identifying items to include in the engagement letter. |
| | B) | Identify types of potential misstatement. |
| | C) | Designing substantive tests. |
| | D) | Designing tests of controls. |
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| 8 | |
When a client obtains accounting services such as payroll from a service organization, the auditor may need to obtain a service auditor's report. Which of the followings statements is true regarding this service audit report? |
| | A) | It should include an opinion. |
| | B) | It provides the client auditor with assurance regarding whether the client's control procedures have been placed in operation. |
| | C) | The client auditor need not inquire about the service auditor's professional reputation. |
| | D) | The client auditor should perform the procedures at the service organization if the report proves to be inappropriate or unreliable. |
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| 9 | |
Access controls, systems documentation controls, and hardware/software controls are known as _____________; whereas control totals, hash totals, validity & reasonableness tests and other input, processing and output controls are examples of _____________. |
| | A) | general controls, application controls. |
| | B) | application controls, general controls. |
| | C) | general controls, operational controls. |
| | D) | application controls, operational controls. |
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| 10 | |
Which of the following statements is true regarding control procedures? |
| | A) | They are not required if the control environment is strong. |
| | B) | They should generally be all manual. |
| | C) | They should generally be all automated. |
| | D) | They can be either manual or automated. |
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