12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing and Assurance Services 7e - Chapter 5 Study

Auditing and Assurance Services 7e - Chapter 5

Terms in this set (28)

The most important People who operate the control system

fundamental component of an
entity's internal control is

The primary purpose for Determine the nature, timing, and extent of further
obtaining an understanding of audit tests to be performed
a nonpublic audit client's
internal control is to

Effectiveness of audit Performing audit procedures during the interim

procedures would be reduced period as opposed to at the fiscal year-end date
by

According to the PCAOB, Determine that the company's controls will satisfy
during the audit of internal the company's control objectives and can
controls for an issuer, the effectively prevent or detect errors or fraud that
ultimate objective of testing could result in material misstatements, if they
the design effectiveness of operate as prescribed.
internal controls is to

To test the operating Confirmation of balances - This is a substantive test,

effectiveness of a control, an not a validity test
audit team might use a
combination of each of the
following tests EXCEPT for:

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12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing and
Which of the Assurance
following is a Services
C. 7e - Chapter
Separation 5 between the payroll andStudy
of duties
preventive control?
personnel departments
a. Reconciliation of a bank
account

b. Recalculation of a sample of
payroll and personnel
departments

c. Separation of duties
between the payroll and
personnel departments

d. Detailed fluctuation analysis

completed by the CFO for
revenue

In most audits of large entities, Auditors will be able to reduce the cost of
control risk assessment substantive procedures by an amount more than the
contributes to audit efficiency, control evaluation costs.
which means that

Which of the following is a An internal control questionnaire

device designed to help the
audit team obtain evidence
about the accounting and
control activities of an audit
client?

Tests of control in a GAAS Obtaining evidence about the operating

audit are required for effectiveness of client control activities.

An action taken by client personnel for the purpose

A transaction-level internal
of preventing, detecting, and correcting errors and
control activity is best
frauds in transactions to eliminate or mitigate risks
described as
identified by the company

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12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing andthe
When planning Assurance
audit of Services 7e - Chapter
Identify 5
significant accounts, locations, and Study

internal controls for an issuer, assertions.

the audit team should

It is reasonably possible that a material

A material weakness is a
misstatement would NOT be detected on a timely
situation in which
basis

Whether there is a reasonable possibility that the

company's controls will fail to prevent or detect a
When completing the audit of misstatement of an account balance or disclosure

internal controls for an issuer,

the severity of an internal AND

control deficiency depends on:

The magnitude of the potential misstatement

resulting from the deficiency or the deficiencies.

Which of the following does Test of controls is not required for nonpublic
NOT accurately summarize entities.
auditors' requirements
regarding internal control?

When completing the audit of Financial Reporting

internal controls for a public
company, the PCAOB requires
auditors to audit internal
controls over

When completing the audit of an audit of internal control, but NOT management's
internal controls for a public report on internal control
company, AS 5 requires
auditors to report on

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12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing and Assurance

When completing the audit of Services 7e operating
Both - Chapter and5design effectiveness Study

internal controls for a public

company, AS 5 requires
auditors to test

Which of the following would d. Overproduction by the manufacturing plant

probably NOT be considered
an indication of a material
weakness?

a. Evidence of a material
misstatement

b. Ineffective oversight by the

audit committee

c. Immaterial fraud committed

by senior management

d. Overproduction by the
manufacturing plant

Which report would NOT be Disclaimer of opinion - significant deficiencies exist

appropriate for a public
accounting firm to provide on
financial reporting controls?

The purpose of separating the Human resources function from the controllership
duties of hiring personnel and function
distributing payroll checks is to
separate the

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12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing and
Which of the Assurance Services
following 7e -report
a. The Chapter
will be5dated as of the date of theStudy
statements is NOT true with financial statements
respect to the auditors' report
on internal control over
financial reporting?

a. The report will be dated as

of the date of the financial
statements

b. The report will express an

opinion on the effectiveness of
internal control over financial
reporting.

c. The auditor will issue an

adverse opinion if one or more
material weaknesses exist.

d. The report may be

presented with the report on
the entity's financial statements
as a combined report.

If the auditors encounter a Disclaimer of opinion

significant scope limitation in
evaluating a public company's
internal control over financial
reporting, which of the
following types of opinions on
the effectiveness of the
company's internal control
over financial reporting would
be appropriate?

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12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing and
Which of the Assurance Services
following 7e - Chapter
Statements 5 the responsibility of the Study
identifying
information would be included auditors and management for IFOCR
in the introductory paragraph
of the auditor's report on
ICOFR if the report is
presented separately from the
auditor's report on the entity's
financial statements?

If the auditor plans to assess Obtain evidence that the controls selected for
control risk at less than the testing are designed effectively and operated
maximum and rely on controls, effectively during the entire period of reliance
and the nature, timing, and
extent of further audit
procedures are based on that
lower assessment, the auditor
must

When testing a control Inquiry of appropriate personnel

activity's operating

effectiveness, procedures the AND

auditor performs to test

operating effectiveness would Reperformance of the control activity

likely include

Matters that could affect the The length of time that the auditor is planning to
necessary extent of testing for rely on the operating efficiency of the control
a control activity as it related to activity
the degree of auditor reliance
on a control activity would
NOT include the following:

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12/15/21, 5:29 PM Auditing and Assurance Services 7e - Chapter 5 Flashcards | Quizlet

Auditing and Assurance Services 7eauditor's

The - Chaptertesting5of controls for the audit ofStudy
internal control on a public company

and

The auditor should assess

control risk for each relevant

Misstatements detected during the financial
assertion by evaluating the
statement audit

evidence obtained from all

sources, including
and

Any control deficiencies identified during the audit

Once the auditor detects a Evaluate the severity of the deficiency on the
control deficiency, which of the auditor's control risk assessment for that assertion.
following steps must he or she
take first?

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