ACC 544 Week 6 Quiz (Internal Controls)
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ACC 544 Week 6 Quiz (Internal Controls)
• Question 1 Which of the following payroll control activities would most effectively ensure that payment is made only for work performed?
• Question 2 Effective internal control over the payroll function would include which of the following?
• Question 3 One of the auditor’s objectives in observing the actual distribution of payroll checks is to determine that every name on the payroll is that of a bona fide employee. The payroll observation is an auditing procedure that is generally performed for which of the following reasons?
• Question 4 A large retail enterprise has established a policy which requires that the paymaster deliver all unclaimed payroll checks to the internal auditing department at the end of each payroll distribution day. This policy was most likely adopted in order to
• Question 5 In the audit of which of the following types of profit-oriented enterprises would the auditor be most likely to place special emphasis on testing the controls over proper classification of payroll transactions?
• Question 6 The reliance placed on substantive tests in relation to the reliance placed on internal control varies in a relationship that is ordinarily
• Question 7 An auditor uses the assessed level of the risk of material misstatement to
• Question 8 The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the
• Question 9 An audit client failed to maintain copies of its procedures manuals and organizational flowcharts. What should the auditor do in an audit of financial statements?
• Question 10 As a result of tests of controls, an auditor assesses control risk too high. This incorrect assessment most likely occurred because
• Question 11 To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is
• Question 12 A client erroneously recorded a large purchase twice. Which of the following controls would be most likely to detect this error in a timely and efficient manner?
• Question 13 A client’s materials-purchasing cycle begins with requisitions from user departments and ends with the receipt of materials and the recognition of a liability. An auditor’s primary objective in reviewing this cycle is to
• Question 14 The company being audited has an internal auditor that is both competent and objective. The independent auditor wants to assign tasks for the internal auditor to perform. Under these circumstances, the independent auditor may
• Question 15 An effective control that protects against the preparation of improper or inaccurate disbursements would be to require that all checks be
• Question 16 During a financial statement audit an internal auditor may provide direct assistance to the independent CPA in performing
• Question 17 When assessing internal auditors' objectivity, an independent auditor should
• Question 18 Which of the following factors most likely would assist an independent auditor in assessing the objectivity of the internal auditor?
• Question 19 Which of the following is the most effective control to detect vouchers that were prepared for the payment of goods that were not received?
• Question 20 Miller Retailing, Inc. maintains a staff of three full-time internal auditors who report directly to the controller. In planning to use the internal auditors to provide assistance in performing the audit, the independent auditor most likely will
• Question 21 The accounts payable department receives the purchase order form to accomplish all of the following except
• Question 22 The independent auditor should acquire an understanding of the internal audit function as it relates to the independent auditor’s consideration of internal control because
• Question 23 For effective internal control purposes, the vouchers payable department generally should
• Question 24 For which of the following judgments may an independent auditor share responsibility with an entity’s internal auditor who is assessed to be both competent and objective?
• Question 25 If the independent auditor decides that the work performed by internal auditors may have a bearing on the independent auditor’s own procedures, the independent auditor should consider the objectivity of the internal auditors. One method of judging objectivity is to
• Question 26 While obtaining an understanding of a client’s risk assessment policies, an auditor ordinarily considers how management
• Question 27 Management’s attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity’s control environment when
• Question 28 Which of the following statements is correct regarding internal control?
• Question 29 Which of the following factors is most relevant when an auditor considers the client’s organizational structure in the context of control risk?
• Question 30 Which of the following analytical procedures most likely would be used during the risk assessment stage of an audit?
• Question 31 Analytical procedures performed during the risk assessment phase of an audit should focus on
• Question 32 Which of the following is an analytical procedure that an auditor most likely would perform when performing the risk assessment of an audit?
• Question 33 Which of the following most likely would cause an auditor to consider whether a client’s financial statements contain material misstatements?
• Question 34 To help plan the nature, timing, and extent of substantive auditing procedures, preliminary analytical procedures should focus on
• Question 35 When a customer fails to include a remittance advice with a payment, it is a common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees?
• Question 36 Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?
• Question 37 An auditor’s tests of controls for completeness for the revenue cycle usually include determining whether
• Question 38 An auditor reviews a client’s accounting policies and procedures when considering which of the following planning matters?
• Question 39 An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using
• Question 40 An auditor has identified the controller's review of the bank reconciliation as a control to test. In connection with this test, the auditor interviews the controller to understand the specific data reviewed on the reconciliation. In addition, the auditor verifies that the bank reconciliation is properly prepared by the accountant and reviewed by the controller as evidenced by their respective sign-offs. Which of the following types of audit procedures do these actions illustrate?
• Question 41 Which of the following best represents a key control for ensuring sales are properly authorized when assessing control risks for sales?
• Question 42 An auditor who uses a transaction cycle approach to assessing control risk most likely would test control activities related to transactions involving the sale of goods to customers with the
• Question 43 To determine whether internal control relative to the revenue cycle of a wholesaling entity is operating effectively in minimizing the failure to prepare sales invoices, an auditor most likely would select a sample of transactions from the population represented by the
• Question 44 For effective internal control, the billing function should be performed by the
• Question 45 At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor in the conduct of an audit?
• Question 46 Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal control in the revenue cycle?
• Question 47 To verify that all sales transactions for which shipment has occurred have been recorded, a test of transactions should be completed on a representative sample drawn from
• Question 48 After testing a client’s internal control activities, an auditor discovers a number of significant deficiencies in the operation of a client’s internal control. Under these circumstances the auditor most likely would
• Question 49 Which of the following is true regarding significant deficiencies?
• Question 50 During the audit the independent auditor identified the existence of a significant deficiency in the client’s internal control and communicated this finding in writing to the client’s management and to those charged with governance. The auditor should
• Question 51 Which of the following statements is correct concerning an auditor’s communication on internal control related matters noted in an audit?
• Question 52 Which of the following would not typically be a control relied upon during an audit?
• Question 53 The auditor would be least likely to be concerned about internal control as it relates to
• Question 54 When preparing a record of a client’s internal control, the independent auditor sometimes uses a flowchart, which can best be described as a
• Question 55 One important reason why a CPA, during the course of an audit engagement, prepares internal control flowcharts is to
• Question 56 In an audit of financial statements, an auditor’s primary consideration regarding a control is whether the control
• Question 57 Effective internal control requires organizational independence of departments. Organizational independence would be impaired in which of the following situations?
• Question 58 An auditor would most likely be concerned with controls that provide reasonable assurance about the
• Question 59 Proper segregation of functional responsibilities calls for separation of the
• Question 60 Which of the following sets of duties would ordinarily be considered basically incompatible in terms of good internal control?
• Question 61 A primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with
• Question 62 Which of the following factors is most likely to affect the extent of the documentation of the auditor’s understanding of a client’s system of internal controls?
• Question 63 Walk-throughs provide evidence that helps auditors to
• Question 64 An auditor’s tests of controls over the issuance of raw materials to production would most likely include
• Question 65 Well functioning internal control for the inventory/production functions would provide that finished goods are to be accepted for stock only after presentation of a completed production order and a(n)
• Question 66 Tests of controls are performed in order to determine whether
• Question 67 Which of the following would be least likely to be included in an auditor’s tests of controls?
• Question 68 Which of the following is not a step in an auditor’s decision to conclude that controls operate effectively?
• Question 69 When an auditor plans to rely on controls that have changed since they were last tested, which of the following courses of action would be most appropriate?
• Question 70 Which of the following is a step in an auditor’s decision to assess the risk of material misstatement at a low level by relying on controls?
• Question 71 A client maintains a large data center where access is limited to authorized employees. How may an auditor best determine the effectiveness of this control activity?
• Question 72 Which of the following is an inherent limitation of internal controls?
• Question 73 An independent auditor has concluded that the client’s records, procedures, and representation can be relied upon based on tests made during the year when internal control was found to be effective. The auditor should test the records, procedures, and representations again at year-end if
• Question 74 When considering internal control to determine whether the necessary procedures are designed and operating effectively, an auditor must
• Question 75 Which of the following is required documentation in an audit in accordance with generally accepted auditing standards?
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