AAP Activity Consideration of Internal Control PDF

11/5/2020 AAP Activity - Consideration of Internal Control
AAP Activity - Consideration of Internal

Control
Total points 29/30
The respondent's email address (miguelantonioalberto@ncba.edu.ph) was recorded on

submission of this form.
Multiple Choice Questions 9 of 10 points
Select the option that gives the best answer.
Internal control can provide only reasonable assurance of achieving 1/1

entity’s control objectives. One factor limiting the likelihood of achieving
those objectives is that *
The cost of internal control should not exceed its benefits.
Management monitors internal control.
The auditor’s primary responsibility is the detection of fraud.
The board of directors is active and independent.
https://docs.google.com/forms/d/e/1FAIpQLSfukg3Qw_XTX3pcoPVmrfZObxZJ5c1KVfchDh2nkEXWDSRbcg/viewscore?sid=176ca729434838cb&vc… 1/13
Inherent limitations in an internal control must be considered in 1/1

evaluating its effectiveness in preventing and detecting errors and fraud.
Inherent limitations do not include *
Incompatible functions performed by the same person.
Misunderstanding of instructions, mistakes of judgment, personal carelessness,

distraction, or fatigue.
Collusion among employees.
Management override of certain policies or procedures.
The following statements relate to internal controls, which one is false? * 0/1
Control procedures reasonably ensure that collusion among employees cannot

occur.
No one person should be responsible for the custodial responsibility and the
recording responsibility for an asset.
Because of the cost benefit relationship, a client may apply control procedures
on a test basis.
Transactions must be properly authorized before such transactions are processed.
Correct answer
Control procedures reasonably ensure that collusion among employees cannot occur.
The primary responsibility for establishing and maintaining an internal 1/1

control rests with *
The internal auditors.
Management and those charged with governance.
The controller or the treasurer.
The external auditors.
Which of the following is not typically one of management’s concerns in 1/1

designing effective internal controls? *
To comply with applicable laws and regulations.
To generate fairly stated financial statements.
To design the most effective internal control possible no matter how much it will
cost.
To generate profits from operations.
Which of the following is not one of the three primary objectives of 1/1
effective internal control? *
Compliance with laws and regulations.
Efficiency and effectiveness of operations.
Reliability of financial reporting.
Assurance of elimination of business risk.
The fundamental purpose of internal control is to * 1/1
Safeguard the resources of the organization.
Encourage compliance with organization objectives.
Provide reasonable assurance that the objectives of the organization are

achieved.
Ensure the accuracy, reliability, and timeliness of information.
Two key components that underlie management’s design and 1/1

implementation of internal control are: *
Costs and materiality.
Absolute assurance and costs.
Inherent limitations and reasonable assurance.
Collusion and materiality.
Which of the following best describes an inherent limitation that should 1/1
be recognized by an auditor when considering the potential
effectiveness of an internal control structure? *
Procedures designed to assure the execution and recording of transactions in

accordance with the proper authorizations are effective against fraud perpetrated by
management.
The competence and integrity of client personnel provide and environment

conducive to control and provides assurance that effective control will be achieved.
Procedures whose effectiveness depends on segregation of duties can be

circumvented by collusion.
The benefits expected to be derived from effective internal control usually do not
exceed the cost of such control.
Which of the following is not one of the three primary objectives of 1/1
effective internal control? *
Compliance with laws and regulations.
Reliability of financial reporting.
Each of the above is primary objective of effective internal control.
Efficiency and effectiveness of operations.
Management philosophy and operating style most likely would have a 1/1
significant influence on an entity’s control environment when *
The audit committee actively oversees the financial reporting process.
The internal auditor reports directly to management
Management is dominated by one individual.
Accurate management job descriptions delineate specific duties.
Which of the following components of an entity’s internal control 1/1

structure includes the development of employee promotion and training
policies? *
Quality control system
Information and communication
Control environment
Control activities
It is important for the auditor to consider the competence of the audit 1/1
client’s employees, because their competence bears directly and
importantly upon the *
Achievement of the objectives of internal control.
Cost-benefit relationship internal control.
Comparison of recorded accountability with assets.
Timing of the tests to be performed.
Which of the following statements is correct with respect to separation 1/1

of duties? *
Employees should not have temporary and permanent custody of assets.
It is desirable to prevent employees who authorize transactions from having

custody of related assets.
It is permissible to allow an employee to open cash receipts and record those

receipts.
None of the above is correct.
Which of the following subcomponents of the control environment 1/1

define the existing lines of responsibility and authority? *
Management integrity and ethical values
Human resource policies and practices
Organizational Structure
Management philosophy and operating style
Which of the following is not one of the subcomponents of the control 1/1
environment? *
Organizational structure.
Commitment to competence.
Management’s philosophy and operating style.
Adequate separation of duties.
The most important type of protective measure for safeguarding assets 1/1
and records is *
Adequate documentation.
Adequate separation of duties among personnel.
The use of physical precautions
Proper authorization of transactions.
An entity’s on going monitoring activities often include * 1/1
The audit of the annual financial statements.
Periodic audits by the audit committee.
Control risk assessment in conjunction with quarterly reviews.
Reviewing the purchasing function.
Which of the following statements best describes the entity’s risk 1/1
assessment process? *
Entity’s assessment of risks that internal control may fail to detect misstatements
affecting the financial statements.
Entity’s process of evaluating the risks of misstatements due to fraud.
Entity’s process of identifying business risk relevant to financial reporting

objectives and deciding about actions to address those risks.
Entity’s assessment of audit risks affecting the financial statements.
Which of the following deal with ongoing or periodic assessment of the 1/1
quality of internal control by management? *
Monitoring activities.
Quality control activities.
Management activities.
Oversight activities.
The auditor’s primary purpose in auditing the client’s system of internal 1/1
control over financial reporting is: *
To efficiently conduct the audit of financial statements.
To report management that the internal controls are effective in preventing

misstatements from an appearing on the financial statements.
To evaluate the effectiveness of the company’s internal controls over all relevant
assertions in the financial statements.
To prevent fraudulent financial statements from being issued to the public.
Auditing standards require the auditor to obtain an understanding of the 1/1

client’s internal control structure *
Sufficient find any frauds which may exist.
Whenever it would be appropriate.
For every audit.
For first time audits.
When compensating control exists, the absence of a key control: * 1/1
Is magnified and must be removed from the sampling process and examined in its
entirety.
Is no longer a concern because there is no longer a significant deficiency or

material weakness.
Could cause a material loss, so it must be tested using substantive procedures.
Is still a major concern to the auditor.
In general, a material weakness in internal control may be defined as a 1/1

condition in which material errors or irregularities may occur and not be
detected within a timely period by *
Management when reviewing interim financial statements and reconciling account

balances.
Outside consultants who issue a special-purpose report on internal control structure.
An independent auditor during tests of control.
Employees in the normal course of performing their assigned functions.
https://docs.google.com/forms/d/e/1FAIpQLSfukg3Qw_XTX3pcoPVmrfZObxZJ5c1KVfchDh2nkEXWDSRbcg/viewscore?sid=176ca729434838cb&v… 10/13
During the consideration of internal control in a financial statement audit, 1/1

an auditor is not obligated to *
Search for significant deficiencies in the operation of the internal control.
Understand the internal control and the information system.
Determine whether the control activities relevant to audit planning have been
implemented.
Performed procedures to understand the design of internal control.
A consideration of internal control made during an audit is usually not 1/1

sufficient to express an opinion on an entity’s control because *
Controls can change each year.
A consideration of internal control is not necessarily made during an audit

engagement.
Weaknesses in the system may go unnoticed during the audit engagement.
Only those controls on which an auditor intends to rely are reviewed, tested and
evaluated.
Evaluating the design of the entity’s internal control would involve * 1/1
Considering whether the control, individually or in combination with other

controls, is capable of effectively preventing, or detecting and correcting material
misstatements.
Determining whether control exists and the entity is using it.
Determining the consistency of application of internal control procedures.
Determining whether the control is operating effectively.
The auditor’s consideration of a company’s internal control is * 1/1
Recommended by SEC.
Require by PSA.
Required under the Philippine Accountancy Act.
Required by the Code of Ethics.
The management letter is used * 1/1
To document the auditor’s consideration of internal controls.
To make recommendation to the client based on observations made during the

audit.
To allow management corroborate oral representations to the auditor.
To confirm the terms of the audit engagement.
When auditing a private company, the auditor should obtain an 1/1

understanding of the client’s internal control sufficient to: *
Provide a basis for suggestions to the client for improving the accounting system.
Assess control risk.
Provide reasonable protection against client fraud and defalcations by client

employees.
Provide a method of safeguarding assets, checking the accuracy and reliability of

accounting data, promoting operational efficiency, and encouraging adherence to
prescribed managerial policies.
This form was created inside of National College of Business and Arts.
Forms

AAP Activity Consideration of Internal Control PDF

Uploaded by

Copyright:

Available Formats

You might also like

AAP Activity Consideration of Internal Control PDF

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

AAP Activity Consideration of Internal Control PDF

Uploaded by

Copyright:

Available Formats

11/5/2020 AAP Activity - Consideration of Internal Control

AAP Activity - Consideration of Internal

The respondent's email address (miguelantonioalberto@ncba.edu.ph) was recorded on

Multiple Choice Questions 9 of 10 points

Select the option that gives the best answer.

Internal control can provide only reasonable assurance of achieving 1/1

The cost of internal control should not exceed its benefits.

Management monitors internal control.

The auditor’s primary responsibility is the detection of fraud.

The board of directors is active and independent.

Inherent limitations in an internal control must be considered in 1/1

Incompatible functions performed by the same person.

Misunderstanding of instructions, mistakes of judgment, personal carelessness,

Collusion among employees.

Management override of certain policies or procedures.

Control procedures reasonably ensure that collusion among employees cannot

Transactions must be properly authorized before such transactions are processed.

The primary responsibility for establishing and maintaining an internal 1/1

The internal auditors.

Management and those charged with governance.

The controller or the treasurer.

The external auditors.

Which of the following is not typically one of management’s concerns in 1/1

To comply with applicable laws and regulations.

To generate fairly stated financial statements.

To generate profits from operations.

Compliance with laws and regulations.

Efficiency and effectiveness of operations.

Reliability of financial reporting.

Assurance of elimination of business risk.

The fundamental purpose of internal control is to * 1/1

Safeguard the resources of the organization.

Encourage compliance with organization objectives.

Provide reasonable assurance that the objectives of the organization are

Ensure the accuracy, reliability, and timeliness of information.

Two key components that underlie management’s design and 1/1

Costs and materiality.

Absolute assurance and costs.

Inherent limitations and reasonable assurance.

Collusion and materiality.

Procedures designed to assure the execution and recording of transactions in

The competence and integrity of client personnel provide and environment

Procedures whose effectiveness depends on segregation of duties can be

Compliance with laws and regulations.

Reliability of financial reporting.

Each of the above is primary objective of effective internal control.

Efficiency and effectiveness of operations.

Multiple Choice Questions 10 of 10 points

Select the option that gives the best answer.

The audit committee actively oversees the financial reporting process.

The internal auditor reports directly to management

Management is dominated by one individual.

Accurate management job descriptions delineate specific duties.

Which of the following components of an entity’s internal control 1/1

Quality control system

Information and communication

Achievement of the objectives of internal control.