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Multiple Choice
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1

Which of the following statements concerning internal control deficiencies is false?
A)A material weakness is a type of control deficiency.
B)A significant deficiency is a type of control deficiency.
C)Significant deficiencies are a subset of material weaknesses that must be reported.
D)The two key elements of internal control deficiencies are likelihood of occurrence and magnitude.
2

Which of the following statements best describes how the requirements under Sarbanes-Oxley will change the auditor's responsibility for issuing an opinion in connection with the audits of most publicly-held companies?
A)CPA firms will be required to add a second opinion related to the reliability of the internal control structure.
B)CPA firms will be required to issue two opinions—one relating to their assessment of how management documents and evaluates internal controls, and the second on the reliability of the internal control system based on the auditor's testing. An opinion on the overall fairness of the financial statements is no longer required.
C)CPA firms will be required to issue two additional opinions- one relating to their assessment of how management documents and evaluates internal controls, and the second on the reliability of the internal control system based on the auditor's testing. An opinion on the overall fairness of the financial statements is still required.
D)While the CPA firm will be required to issue the two additional opinions discussed in the choices above, they are for client use only and do not need to be made available in the company annual report.
3

The requirements of section 404 of The Sarbanes-Oxley Act of 2002 apply to:
A)All companies that are subject to an independent audit.
B)All publicly-held companies.
C)Most publicly-held companies.
D)All companies with sales in excess of $250 million dollars.
4

Which of the following steps or procedures is least likely to be performed as part of management's assessment of the effectiveness of internal controls?
A)Engaging the external auditors to conduct cut-off tests.
B)Determining the locations or business units to be evaluated.
C)Evaluating the design effectiveness and operating effectiveness of selected controls.
D)Communication of their findings to the external auditors.
5

Which of the following statements is false concerning the audit requirements of the Sarbanes-Oxley Act of 2002 related to internal controls?
A)Management's report should state their responsibility for establishing and maintaining an effective internal control structure.
B)Management should identify both significant deficiencies and material weaknesses in their report.
C)The auditor should evaluate whether the internal controls appear to be effective in accurately and fairly reflecting the client's transactions.
D)The auditor should provide recommendations for improving the internal control structure as part of their assessment.
6

With regard to the definition of internal control and identifying internal control objectives, the PCAOB's AS2 standard is _________________ in comparison with the Committee of Sponsoring Organizations [COSO] report.
A)More broad-based
B)More detailed
C)About the same
D)Exactly the same
7

The role of the registered independent auditing firm relative to management's assessment of internal controls under the Sarbanes-Oxley Act of 2002 is to:
A)Express an opinion on whether the client is subject to all provisions of the Securities Exchange Act of 1934.
B)Attest to, and report on, the assessment made by management.
C)Report to both the PCAOB & SEC those clients with unsatisfactory internal controls.
D)Provide report feedback but disclaim an opinion on management's assessment.
8

Which of the following types of audit reports on internal controls is not permitted if the only problem an auditor has encountered is one or more control deficiencies?
A)Qualified.
B)Unqualified.
C)Adverse.
D)All of the above are permitted.
9

One of the main weaknesses of the test data approach is that it:
A)Is controlled by the client.
B)Cannot include hash totals.
C)Is inconsistent with other audit field work standards.
D)Can be very time consuming to create and apply.
10

A parallel simulation is unique as a computer-assisted audit technique in that it:
A)Involves continuous monitoring.
B)Is a computer simulation that mimics the client's production programs.
C)Uses test data.
D)Creates a dummy entity.





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