Auditing Flashcards - Quizlet

12/16/21, 8:30 PM Auditing Flashcards | Quizlet
Auditing Study
Social Sciences / Sociology / Management
Auditing
Terms in this set (134)
Which is not part of the Implementation Guidance

mandatory guidance for the
International Professional
Practices Framework?
Code of Ethics
Implementation Guidance
Definition of Internal Auditing
International Standards for the

Professional Practice of
Internal Auditing
Which is not part of the Confidentiality

Definition of Internal Auditing?
Independent Activity
Confidentiality
Objective Assurance Activity
Adds Value
Consulting Activity
If the first digit of a Standard is Performance

2, what type of standard is it?
Consulting
Performance
Assurance
Attribute
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Auditing
Which is NOT one of the Core Provides error free judgment Study
Principles for the Professional

Practice of Internal Auditing?
Communicates effectively
Promotes organizational
improvement
Provides error free judgment
Demonstrates integrity
An internal auditor who Integrity

knowingly is a party to an
illegal activity violates which
rule of conduct?
Objectivity
Confidentiality
Integrity
Competency
An internal auditor who Objectivity

accepts anything that may
impair his or her independence
violates which rule of conduct?
Objectivity
Integrity
Confidentiality
Competency
An internal auditor who does Competency

not continue to improve her or
his proficiency violates which
rule of conduct?
Integrity
Competency
Confidentiality
Objectivity
Auditing
An internal auditor who uses Confidentiality Study
information for personal gain

Objectivity
Confidentiality
Competency
Integrity
An internal auditor who does Objectivity

not disclose all material facts
Competency
Confidentiality
Integrity
Objectivity
Which is not true regarding the The group controlled Japan's stock market
Okurasho?
The group controlled Japan's

stock market
For hundreds of years it was

responsible for overseeing
Japan's economic development
The group effectively

controlled Japan's banking
system
The group advised the

Japanese emperor on major
economic decisions
Auditing
Which is not true regarding the The MOF was not held responsible for huge Study
Ministry of Finance (MOF)?

government bailouts
The MOF was controlled by
the Okurasho
MOF hand picked individuals

to serve in key executive
positions in large accounting
firms
The MOF was not held

responsible for huge
government bailouts
The MOF controlled large

accounting firms
Low audit fees in Japan Improved profitability for Japanese firms

resulted in all of the following
EXCEPT:
Less profitable engagements

for Japanese accounting firms
Improved profitability for

Japanese firms
Severe scope limitations on

audits in Japan
Some Japanese auditors Low audit fee payments

subordinated their judgment to
others due to all of the
following EXCEPT:
Cultural emphasis on
relationships
Low audit fee payments
Cultural emphasis on
harmonious working practices
Auditing
All of the following led to a New regulatory structure for the public accounting
Study
credibility crisis for Japan's profession

independent audit function
EXCEPT:
Fraudulent accounting
Abrupt failures of financial

institutions
MOF's failure to impose

sanctions on the public
accounting profession
New regulatory structure for

the public accounting
profession
Which is not a limitation of Absolute assurance of achievement of entity

Enterprise Risk Management objectives
(ERM)?
Cost verses benefit
Management override
Control circumvention by
collusion
Errors, mistakes, or faulty

judgment
Absolute assurance of
achievement of entity
objectives
Which is not a risk response of Align mission with risk appetite

Enterprise Risk Management
(ERM)?
Accept
Share or transfer
Reduce
Eliminate or avoid
Align mission with risk appetite
Auditing
Enterprise Risk Management Eliminates organizational uncertainty Study
(ERM) attempts to maximize

value in all of the following
areas EXCEPT:
Helps strike an optimal

balance between growth and
return goals and related risks
Eliminates organizational
uncertainty
Helps ensure compliance with

laws and regulations
Helps ensure effective

reporting
Helps avoid damage to

reputation
After the organization Assess impact of the event

identifies events that may
impact organizational
objectives, the next step is to
Design risk responses for the

event
Assess risk responses for the

event
Assess likelihood of the event
Assess impact of the event
Auditing
Contingency plans should be High impact threats with a low likelihood of Study
made for events for

occurring
High impact opportunities with
a high likelihood of occurring
Low impact opportunities with

a high likelihood of occurring
High impact threats with a low

likelihood of occurring
Low impact threats with a high

likelihood of occurring
Critics were concerned that Non union

working conditions in Nike's Far
Eastern production facilities
were all of the following
except:
Violation of countries' labor

laws
Non union
Hazardous
Harsh
Nike's production facilities Korea

were principally located in all
of the following countries
except:
Vietnam
Taiwan
China
Indonesia
Korea
Auditing
Nike's code of conduct Satisfy U.S. labor standards Study
required "business partners" to

do all of the following except:
Pay no less than the minimum

wage mandated by the country
Provide safe working
environment for workers
Satisfy U.S. labor standards
Fully compensate workers for

overtime hours
Which of the following were Refusal to pay wages for current employees
not improper practices or
incidents reported by Ernst
and Young?
Refusal to pay wages for

current employees
Excessive noise levels and

temperatures
Inadequate ventilation systems
Insufficient safety equipment
Auditing
Alleged deficiencies in Ernst & Failing to test payroll records to see if they metStudy
Young's engagement included country minimum wage guidelines
all of the following except:
Failing to test payroll records

to see if they met country
minimum wage guidelines
Failing to ensure that
employees questioned during
the engagement were free to
respond candidly without any
fear of reprisals from
management
Failing to properly test air

quality and other working
conditions in the factory
Relying heavily on the factory's

management for information
collected during the
engagement
The internal audit activity must True

evaluate the effectiveness and
contribute to the improvement
of risk management processes.
True
False
Auditing
Determining whether risk All risks have effective controls Study
management processes are

effective is a judgment
resulting from the internal
auditor's assessment of all of
the following EXCEPT:
Relevant risk information is

captured and communicated in
a timely manner across the
organization, enabling staff,
management, and the board to
carry out their responsibilities
Significant risks are identified

and assessed
Organizational objectives
support and align with the
organization's mission
Appropriate risk responses are

selected that align risks with
the organization's risk appetite
All risks have effective controls
Risk management processes Both ongoing management activities and separate

are monitored through:
evaluations
Separate evaluations
Both ongoing management

activities and separate
evaluations
Ongoing management
activities
Auditing
The internal audit activity must Management of risks by the internal audit Study
evaluate risk exposures relating department

to the organization's
governance, operations, and
information systems regarding
all of the following EXCEPT:
Achievement of the
organization's strategic
objectives
Compliance with laws,

regulations, policies,
procedures, and contracts
Effectiveness and efficiency of

operations and programs
Safeguarding of assets
Reliability and integrity of

financial and operational
information
Management of risks by the

internal audit department
Auditing
Which of the following is false?
Internal auditors are ultimately responsible for the
Study
During consulting management of organizational risk

engagements, internal auditors
must address risk consistent
with the engagement's
objectives and be alert to the
existence of other significant
risks
Internal auditors must

incorporate knowledge of risks
gained from consulting
engagements into their
evaluation of the organization's
risk management processes
Internal auditors are ultimately

responsible for the
management of organizational
risk
The internal audit activity must

evaluate the potential for the
occurrence of fraud and how
the organization manages
fraud risk
When assisting management in

establishing or improving risk
management processes,
internal auditors must refrain
from assuming any
management responsibility by
actually managing risks
Auditing
According to "Internal Control Safeguarding of assets Study
- Integrated Framework,"
internal control is designed to
provide reasonable assurance
regarding the achievement of
all of the following objectives
EXCEPT:
Reliability of financial reporting

operations.
Compliance with applicable

laws and regulations
According to COSO's "Internal Establishment of Objectives

Control - Integrated
Framework," control
environment factors include all
of the following EXCEPT:
Attention and Direction

Provided by Board of Directors
Management's Philosophy and
Operating Style
Integrity and Ethical Values
Assignment of Authority and

Responsibility
Establishment of Objectives
Auditing
Which of the following in NOT Control benefits always exceed costs Study
an inherent limitation of
internal control?
Circumvention of controls
through collusion
Management may override

controls
Controls may break down due

to misunderstanding,
carelessness, or fatigue
Human judgment is faulty
Control benefits always

exceed costs
Which of the following type of Reporting and Compliance

objectives are within the
organization's control?
Strategic and Operations
Reporting and Compliance
Compliance and Operations

Reporting and Strategic
Strategic and Compliance
Which is the most important Control Environment

component of internal control?
Control Environment
Risk Assessment
Control Activities
Monitoring
Information and
Communication
Auditing
Which of the following Federal Trade Commission Study
agencies was not embroiled in

a tedious and often unfriendly
struggle to be the first to
prosecute key parties in the
Livent fraud?
Federal Trade Commission
Ontario Securities Commission
Royal Canadian Mounted

Police
SEC
U.S. Department of Justice
Which was not frustrating to Quick pace of the investigation into the fraud
the U.S. law enforcement allegations
authorities?
Quick pace of the investigation

into the fraud allegations
Lack of Canadian cooperation

in the extradition of Drabinsky
and Gottlieb
Snails pace of Canadian

authorities in pursuing legal
action against Drabinsky and
Gottlieb
Auditing
Webster found all of the Pay and benefits Study
following work environment

situations less than ideal
except for:
Drabinsky had warned

accountants not to provide
certain financial information to
Webster until Drabinsky had
reviewed and approved it
After meeting with Drabinsky,

company accountants were
often in tears and/or nauseous
Pay and benefits
Livent's executives often

screamed and swore at
company accountants
Drabinsky had an abusive and

profane management style
Deferred expense frauds Fake ticket sales

included all of the following
except:
Debiting salary and operating

expenses to fixed asset
accounts
Transferring preproduction
costs from a show that was
running to a show still in
production
Kickback fake charges

capitalized as preproduction
costs for developing shows
Fake ticket sales
Charging preproduction costs

to fixed asset accounts
Auditing
Which of the following was not Strong cash flows Study
a red flag for financial

statement fraud?
Strong cash flows
Constant and growing need for

additional capital
Extremely agressive growth-

oriented management team
Related-party transactions
History of prior financial

reporting indiscretions by top
management

assist the organization in
maintaining effective controls
by evaluating their
effectiveness and efficiency
and by promoting continuous
improvement
True
False
Auditing
The internal audit activity must Internal audit's management of organization risks
Study
evaluate the adequacy and

effectiveness of controls in
responding to risks within the
organization's governance,
operations, and information
systems regarding all of the
following EXCEPT:
Reliability and integrity of

financial and operational
information
Achievement of the
organization's strategic
objectives

operations and programs
Compliance with laws,

regulations, policies,
procedures, and contracts
Internal audit's management of

organization risks
The organization's governance, True

operations, and information
systems areas of concern for
evaluating the adequacy and
effectiveness of controls in
International Standard 2130 are
the same as the areas of
concern for evaluating risk
exposures in Standard 2120
True
False
Auditing
Adequacy deals with the True Study
design of the controls;

effectiveness deals with the
implementation of the controls.
True
False
Internal auditors cannot False

incorporate knowledge of
controls gained from
consulting engagements into
evaluation of the organization's
control processes
True
False
Which is NOT one of the Existence

transactions and events
assertions?
Accuracy
Existence
Cutoff
Completeness
Classification
What is the best type of audit Observation

procedure?
Record examination
Interviews
Reperformance
Confirmation
Observation
Auditing
What is the best type of Confirmation Study
evidence to evaluate existence

of accounts receivable?
Confirmation
Tracing
Observation
Reperformance
Interviews
Which of the following is NOT a Confirmation of accounts receivable

completeness test?
Recalculation of taxes and

benefits payable
Recalculation of interest
expense
Confirmation of accounts
receivable
Search for unrecorded

liabilities
Tracing
Which document should be Shipping documents

sampled to determine whether
or not sales are recorded in
the proper period?
Receiving documents
Sales invoices
Sales orders
Purchase orders
Shipping documents
Auditing
Which of the following was Increase in sales of the Mighty Morphin Power Study
NOT a risk factor for financial Rangers merchandise
statement fraud in the case?
Change in the factoring of year

end accounts receivable from
88% in 1994 to 19% in 1995
Increase in sales of the Mighty

Morphin Power Rangers
merchandise
$2.4 million sale to Wow Wee

on the final day of the fiscal
year
Majority of fictitious sales to

West Coast Liquidators during
the final month of the fiscal
year
Which of the following was The Wow Wee receivable was collected
false regarding the Wow Wee
receivable?
Wow Wee was one of the

company's largest suppliers
Wow Wee confirmation had

wrong address
The Wow Wee receivable was

collected
Auditor did not perform

follow-up procedures on the
confirmation
Goldberg forged the Wow

Wee confirmation and faxed it
to the auditor
Auditing
Which of the following was West Coast Liquidators eventually paid the entire
Study
NOT a problem with the West amount showing as accounts receivable at year end
Coast Liquidators receivable?
West Coast Liquidators

eventually paid the entire
amount showing as accounts
receivable at year end
Invoices did not contain

purchase order numbers or
bills of lading
Auditors failed to include the

receivable in the year end
cutoff testing
Receivable was not confirmed

even though it represented 13%
of Happiness Express's year
end accounts receivable
What was the major strategic Company was heavily dependent on one or a few
problem that led to financial lines of merchandise
problems in the case?
The Little Mermaid and Barney

had impressive sales
The company had a track

record of picking merchandise
winners
The Mighty Morphin Power

Rangers initial sales were weak
Company was heavily

dependent on one or a few
lines of merchandise
Auditing
Who was not included in the Barney Study
SEC criminal complaint?
Joseph Sutton
Isaac Sutton
Barney
Michael Goldberg
Internal auditors must do all of Create

the following with information
to ensure sufficient information
to achieve the engagement's
objectives EXCEPT:
Document
Create
Analyze
Identify
Evaluate
Internal auditors must identify True

sufficient, reliable, relevant,
and useful information to
achieve the engagement's
objectives
True
False
Auditing
Reliable information is the the most cost effective
Study
Useful information helps the information through the use of appropriate

organization meet its goals
engagement techniques
Relevant information supports
engagement observations and
recommendations and is
consistent with the objectives
for the engagement
Reliable information is the the

most cost effective information
through the use of appropriate
engagement techniques
Sufficient information is factual,

adequate, and convincing so
that a prudent, informed
person would reach the same
conclusions as the auditor
Internal auditors should not False

base conclusions and
engagement results on
appropriate analyses and
evaluations
True
False
Auditing
Which of the following Legal counsel must control access to engagement
Study
statements is false?
records
Internal auditors must
document relevant information
to support the conclusions and
engagement results
The chief audit executive must

develop retention
requirements for engagement
records, regardless of the
medium in which each record
is stored. These retention
requirements must be
consistent with the
organization's guidelines and
any pertinent regulatory or
other requirements
Legal counsel must control

access to engagement records
The chief audit executive must
develop policies governing the
custody and retention of
consulting engagement
records, as well as their release
to internal and external parties.
These policies must be
consistent with the
organization's guidelines and
any pertinent regulatory or
other requirements
Auditing
Which type of sampling should Attribute Study
be used to test controls?
Attribute
Variable
Discovery
Stop and Go
Which is not one of the auditor Calculated deviation rate

judgments made by auditors to
calculate sample size?
Confidence level
Calculated deviation rate
Expected deviation rate
Tolerable deviation rate
What is the risk that the sample Sampling risk

does not represent the
population?
Random risk
Sampling risk
Nonsampling risk
Tolerable deviation risk
Auditing
What would the sample size be 45 Study
based on the following

factors?
Confidence level - 90%
Tolerable deviation rate - 5%
Expected population deviation

rate - 0.00%
93
59
77
45
Based on the following Yes

information, is the control
working effectively?
Sample size - 80
Actual number of deviations

found - 1
Tolerable deviation rate - 5%
Confidence level - 90%
Yes
No
Auditing
After the end of apartheid, Currency instability Study
major institutional investors

were reluctant to invest in
South Africa due to all of the
following factors EXCEPT:
Corruption
Volatility
Currency instability
Uncertainty
Corruption, according to the Overstatement of Revenues

Ernst & Young study, included
widespread abuses in all of the
following areas EXCEPT:
Bribery
Payroll Fraud
Inventory Theft
Unauthorized Expenditure
Overstatement of Revenues
All of the following are reasons Low wages for Chartered Accountants
for a significant shortage of
Chartered Accountants (CA) in
South Africa EXCEPT:
Underrepresentation of black
Chartered Accountants
Restrictive immigration laws
Emigration of white Chartered

Accountants
Low wages for Chartered

Accountants
Auditing
The profession and South African Standards on Auditing (SASA) Study
government strengthened
South Africa's accounting and
auditing standards and the
independent auditing function
by adopting all of the following
EXCEPT:
International Financial
Reporting Standards (IFRS)
Auditing Profession Act (APA)
South African Standards on

Auditing (SASA)
International Standards on
Auditing (ISA)
Auditing
All of the following are true RAs who do not comply with the requirement could
Study
regarding Registered Auditor face a prison sentence of up to 5 years

(RA) requirements under the
Auditing Profession Act (APA)
to report irregularities EXCEPT:
Reportable irregularities must

be disclosed to the IRBA
without delay
One audit partner was

concerned that the irregularity
disclosure requirements would
make clients reluctant to
discuss problems with the
auditors
Irregularity reporting is the

responsibility of individual RAs
and not the firm
RAs who do not comply with

the requirement could face a
prison sentence of up to 5
years

evaluate and contribute to the
improvement of governance,
risk management, and control
processes using a systematic
and disciplined approach.
True
False
Auditing
The internal audit activity must Managing organizational governance processes
Study
assess and make appropriate

recommendations for
improving the governance
process in its accomplishment
of the following objectives
EXCEPT:
Managing organizational
governance processes
Ensuring effective
organizational performance
management and
accountability
Communicating risk and

control information to
appropriate areas of the
organization
Coordinating the activities of

and communicating
information among the board,
external and internal auditors,
and management
Promoting appropriate ethics

and values within the
organization

evaluate the design,
implementation, and
effectiveness of the
organization's ethics-related
objectives, programs, and
activities.
True
False
Auditing
The internal audit activity must True Study
assess whether the information

technology governance of the
organization supports the
organization's strategies and
objectives.
True
False
The internal audit activity must Compliance

evaluate and contribute to the
improvement all of the
following processes using a
systematic and disciplined
approach EXCEPT:
Compliance
Governance
Risk Management
Control
What is the foremost Audience

consideration for effective
communication?
Process
Format
Audience
Results
Auditing
When considering the needs of Who is to blame? Study
your audience, writing should

answer all of the following
questions EXCEPT:
What should I do?
What is the problem?
Why should I do it?
Who is to blame?
How should I do it?
What is the most important Move your audience to action based on your
purpose for communication?
recommendations
Present your arguments
Persuade your audience to

believe in your
recommendation
Summarize your audit steps
Move your audience to action

based on your
recommendations
All of the following should be What should be done with the findings?
included in the introductory
paragraph of a memo EXCEPT:
Who did the assessment?
When and where did the

assessment occur?
What should be done with the

findings?
What did the assessment find?
Why are the assessment

findings important?
Auditing
All of the following should be What are recommendations to address the Study
included in the problem problem?

paragraph of a memo EXCEPT:
What was the problem?
When and where did the

problem occur?
Why is the problem important?

What are recommendations to
address the problem?
Who was involved in the

problem?
The Big Four accounting firms Low audit fees in China

face significant challenges in
China in all of the following
areas EXCEPT:
China's regulatory
infrastructure that has
conflicting regulations and
layers of bureaucracy
Aquiring skilled accountants

and auditors to staff Chinese
practices
Increasing litigation risk in

China
Low audit fees in China
Authoritarian central
government in China
Auditing
Which of the following is NOT China Transportation Bank Study
one of the "Big Four" banks that

serve as the cornerstone of
China's economy?
Industrial and Commercial

Bank of China
Bank of China
Agricultural Bank of China

China Construction Bank
China Transportation Bank
After the adoption of Chinese The CIAS standards were inadequate

Independent Auditing
Standards (CIAS) in 1994, the
audits by domestic firms
remained questionable due to
all of the following practices
EXCEPT:
Audit clients routinely

pressured auditors to help
them conceal material errors
and fraud
The CIAS standards were

inadequate
Some companies would not

reappoint auditors if they
would not help them hide
wrongdoing
Many domestic firms

considered the standards as
guidelines rather than
mandatory rules
Auditing
China's emerging economy China's government wanted to increase its Study
increased the demand for ownership of foreign investments

independent audits in China for
all of the following reasons
EXCEPT:
China's government wanted to

increase its ownership of
foreign investments
State-owned entererprises
needed audits to encourage
foreign investors to purchase
minority interests in the firms
Large foreign owned

investments required Chinese
subsidiaries to be consolidated
into another entity's financial
statements
Audits established important

measures of accountability for
professional management
teams
Which of the following types of State-owned enterprises

business organizations was
well established in China
before Deng Xiaoping's
economic reforms?
State-owned enterprises
Enterprises with foreign

investments
Collectively-owned
enterprises
Individually-owned enterprises
Auditing
Internal auditors must True Study
communicate the results of

engagements
True
False
Communications must include Audit procedures

Engagement's objectives
Audit procedures
Conclusions
Engagement's scope
Recommendations
Action plans
Auditing
Internal auditors are not encouraged to Study
Final communication of acknowledge satisfactory performance in

engagement results must, engagement communications
where appropriate, contain the
internal auditors' opinion
and/or conclusions. When
issued, an opinion or
conclusion must take account
of the expectations of senior
management, the board, and
other stakeholders and must
be supported by sufficient,
reliable, relevant, and useful
information
Internal auditors are not

encouraged to acknowledge
satisfactory performance in
engagement communications
Opinions at the engagement

level may be ratings,
conclusions, or other
descriptions of the results.
Such an engagement may be in
relation to controls around a
specific process, risk, or
business unit. The formulation
of such opinions requires
consideration of the
engagement results and their
significance
When releasing engagement

results to parties outside the
organization, the
communication must include
limitations on distribution and
use of the results
Communication of the
progress and results of

Auditing
consulting engagements will
Study
vary in form and content

depending upon the nature of
the engagement and the needs
of the client
Auditing
Timely communications do not allow management
Study
Timely communications do not to take appropriate corrective action

allow management to take
appropriate corrective action
Objective communications are

fair, impartial, and unbiased
and are the result of a fair-
minded and balanced
assessment of all relevant facts
and circumstances
Constructive communications
are helpful to the engagement
client and the organization and
lead to improvements where
needed
Complete communications lack

nothing that is essential to the
target audience and include all
significant and relevant
information and observations
to support recommendations
and conclusions
Accurate communications are

free from errors and distortions
and are faithful to the
underlying facts
Concise communications are to

the point and avoid
unnecessary elaboration,
superfluous detail, redundancy,
and wordiness
Clear communications are

easily understood and logical,
avoiding unnecessary technical
language and providing all
significant and relevant
information
Auditing Study
If a final communication True

contains a significant error or
omission, the chief audit
executive must communicate
corrected information to all
parties who received the
original communication
True
False
All of the following are Purchase requisitions

parameter authorizations
EXCEPT:
Purchasing policies
Supplier lists
Purchase requisitions
Purchasing limits
Incorrectly recording a current Improper classification

period expense as inventory or
equipment represents which
type of key risk?
Not occurred
Improper classification
Improper cutoff
Not accurate
Auditing
All of the following overstate Not recording inventory that does exist Study
net income EXCEPT:
Overstating inventory
valuations
Understating accounts payable

for current period expenses
Recording inventory that does

not exist or is duplicated
Not recording inventory that

does exist
All of the following are Contractor authorization

transaction authorizations
EXCEPT:
Contractor authorization
Purchase orders
Payment authorization
Which of the following Classification-Rights and Obligations

management assertions for
internal controls over financial
reporting is least related to the
management assertions for
financial statements and note
to financial statements?
Occurrence-Existence
Uniqueness-Existence
Completeness-Completeness
Classification-Rights and
Obligations
Auditing
Shari'a auditing is a systematic Political Study
process of objectively
obtaining and evaluating
evidence regarding all of the
following assertions EXCEPT:
Political
Religious
Environmental
Socio-economic
The principle Islamic banking United States

centers are in all of the
following locations EXCEPT:
Malaysia
United States
Middle East
United Kingdom
Which of the following Islamic finance prohibits both interest and profits
statements is false?
Islamic law forbids the

payment or receipt of interest
in personal relationships
Shari'a prohibits the payment

or receipt of interest in
business relationships
Islamic finance prohibits both

interest and profits
Islamic banking prohibits

interest payments on capital
within the Islamic world
Auditing
Shari'a compliant economic Personal hygiene Study
transactions must be
sanctioned by Islamic religious
scholars in all of the following
areas EXCEPT:
Economic ventures
Individual transactions
Business practices
Personal hygiene
The Accounting and Auditing Performs Shari'a audits of Islamic banks

Organization for Islamic
Financial Institutions (AAOIFI)
does all of the following
EXCEPT:
Staff of professional
accountants monitor emerging
accounting and independent
auditing issues
Issues Shari'a standards for

Islamic bank compliance
Shari'a standards attempt to

enhance consistency of Shari'a
compliance decisions
Performs Shari'a audits of

Islamic banks
Auditing
What is the primary difference Objectivity is an individual attribute while Study
between objectivity and independence is an organizational attribute.

independence?
One cannot be both

independent and objective.
If one is independent, one

must be objective.
Objectivity is an individual
attribute while independence
is an organizational attribute.
One must be objective in order

to be independent.
The Chief Audit Executive administratively to the Chief Executive Office and
should report:
functionally to the Board of Directors.
functionally to the Chief
Executive Officer.
administratively to the Chief

Executive Office and
functionally to the Board of
Directors.
functionally to the Chief

Executive Officer and
administratively to the Board of
Directors.
administratively to the Board of

Directors.
Auditing
Impairment to organizational Prohibitions on doing consulting engagements.Study
independence and individual
objectivity may include all of
Restrictions on access to
records, personnel, and
properties.
Prohibitions on doing
consulting engagements.
Resource limitations.
Scope limitations.
How long should the At least one year.

organization wait before
assigning a person to audit an
activity for which they
previously performed work or
for which they were previously
responsible?
At least one year.
The organization does not

need to wait any time before
assigning the auditor.
At least two years.
Auditor should never audit an

activity for which they
previously performed work or
for which they were previously
responsible.
Auditing
If objectivity or independence the parties described in the internal audit charter.
Study
is impaired in appearance or
fact, the details of the
impairment must be disclosed
to
Law Enforcement.
Board of Directors.
the parties described in the

internal audit charter.
Senior Management.
Before recording an accounts Packing slips

payable, all of the following
documents should be matched
EXCEPT:
Receiving reports
Packing slips
Purchase orders
Invoice
Which is the correct process Purchase requisition, purchase order, receiving

order for generating report
purchasing documents?
Purchase requisition, receiving

report, purchase order
Purchase order, purchase

requisition, receiving report
Purchase requisition, purchase

order, receiving report
Receiving report, purchase

requisition, purchase order
Receiving report, purchase

order, purchase requisition
Auditing
Purchase requisitions and Price Study
purchase orders generally

should have the same
following information EXCEPT:
Required delivery date
Item specifications
Quantity requested
Price
The board generally approves Routine purchase orders

Routine purchase orders
Designates who can approve

purchases up to purchase
authorization limits
Purchase authorization limits
Purchasing policies
According to proper Custodians

segregation of duties, shipping
and receiving clerks are
considered:
Reviewers
Recorders
Custodians
Transaction authorizers
Auditing
According to the case, which Multinational firms have a basis for judging quality
Study
of the following is false?

of audits performed by accounting firms in the
Major international accounting same organization.
firms have "franchised their
names like the McDonald's
burger chain, but without its
quality control."
International accounting firms

are collectively largely
responsible for multinational
audit failure.
Multinational firms have a basis

for judging quality of audits
performed by accounting firms
in the same organization.
Major accounting firms are

only "loose confederal"
organizations.
Auditing
According to the case, which Financial statements prepared under U.S. and Study
of the following is false?

International GAAP are always comparable
A need exsists for better
"cross-border cooperation"
between various rule-making
bodies for accounting and
auditing
International Accounting
Standards Board believes
accounting standards should
be principles-based
Financial statements prepared

under U.S. and International
GAAP are always comparable
Financial Accounting Standards

Board generally issues
prescriptive or detailed
accounting standards
As the company expanded Currency translations

outside of Western Europe and
the United States, all of the
following wide range problems
proved problematic for the
company EXCEPT for:
Laws
Currency translations
Regulations
Cultural nuances
Auditing
All of the following human Bonuses Study
resource policies developed in

the Netherlands were not well
received by new managers in
Asia, Latin America, and South
America EXCEPT
Hiring practices
Performance appraisal
Employee benefits
Bonuses
What factor created pressure Unrealistic earnings targets

which motivated managers to
commit financial statement
fraud in this case?
Unrealistic earnings targets
Improper accounting for

promotional allowances
Improper consolidations
Lack of a code of professional

conduct
Which of the following is false Infallability

regarding competency?
Infallability
Perform services in
accordance with the Standards
Continually improve one's
proficiency and effectiveness
of services
Engage only in services where

you have the necessary
knowledge, skills, and
experience
Auditing
Both individual internal auditors and the internalStudy
Both individual internal audit activity must possess the knowledge, skills,
auditors and the internal audit and other competencies to perform their
activity must possess the responsibilites.
knowledge, skills, and other
competencies to perform their
responsibilites.
Proficiency is what you posses

and due professional care is
how you act.
The chief audit executive

assures that persons assigned
collectively possess the
knowledge, skills, and
experience to appropriately
conduct the engagement.
Engagements must be
performed with both
proficiency and due
professional care.
Which is not a consideration Identifying all significant risks.

for exercising due professional
care?
Use of technology-based audit

techniques.
Identifying all significant risks.
Cost benefit of assurance.
Use of other data analysis

techniques.
Auditing
Which of the following is false Provides absolute assurance that noncompliance or
Study
regarding due professional irregularities do not exist.

care?
Provides absolute assurance

that noncompliance or
irregularities do not exist.
Reasonable examinations and

verfications.
Reasonable care.
Consider material irregularities

and noncompliance.
Which is not a major Timing of tests.

consideration for external
service providers?
Competence.
Timing of tests.
Independence
Objectivity
Sequential numbering of Classification

purchase requisitions, purchase
orders, and receiving reports
provides evidence for all of the
following management
assertions EXCEPT:
Uniqueness
Classification
Occurrence
Completeness
Auditing
Audit planning includes all of Complete purchasing cycle control questionnaire
Study
Brainstorm to identify areas

most susceptible to fraud or
errors
Review prior purchasing audit

programs and audit report
Complete purchasing cycle

control questionnaire
Document scope, timing, and

budget of audit
Gaps in the numerical Completeness

sequence of documents may
indicate a lack in the area of
which of the following
management assertions.
Completeness
Cutoff
Uniqueness
Occurrence
Tracing a sample of items in Classification

receiving reports to approved
purchase orders test all of the
following management
assertions EXCEPT:
Occurrence
Authorization
Classification
Completeness
Auditing
Which of the following is the Trace invoice paid to purchase requisition, purchase
Study
most important test of order, and receiving report to match item

management assertions related description, quantity, and price; and verify approval
to authorization, occurrence, of invoice payment
completeness, uniqueness, and
accuracy?
Verify that all recorded items

are documented
Verify that all documents are

recorded in the records
Analyze purchase requisitions,

purchase order, and receiving
reports for out of sequence
documents, numerical
sequence gaps, and duplicates
documents
Trace invoice paid to purchase

requisition, purchase order,
and receiving report to match
item description, quantity, and
price; and verify approval of
invoice payment
Auditing
After overthrowing Sudan's Imposed Islamic or Shari'a law on southern Sudan
Study
central government and taking

control of Khartoum, what was
the first thing the new
government did?
Financed terror attacks on its

own citizens
Imposed Islamic or Shari'a law

on southern Sudan
Organized large bands of

armed mercenaries or
janjaweed to wipe out entire
villages in southern Sudan
Fought economic sanctions to

limit its financing of terrorism
What does the acronym SST State sponsors of terrorism

stand for?
State suppressed terrorism
State sanctioned terrorism
State supported terrorism
State sponsors of terrorism
Why did the SEC require public Response to a U.S. House of Representatives
companies to disclose any and committee report
all SST countries?
It was the right thing to do
Response to a U.S. House of

Representatives committee
report
A law passed by Congress

required them to do it
The president directed them to

do it
Auditing
What reason did Berkshire Investment was not material to their company'sStudy
Hathway give for not disclosing financial statements
their investment in PetroChina?
PetroChina had minimal

business operations in Sudan
They overlooked the disclosure

Sales were not material to
overall revenue
Investment was not material to

their company's financial
statements
Which of the following is not a The SEC was not responsive to legislators' concerns
critique of the SEC's SST
disclosure policy?
The SEC was not responsive to

legislators' concerns
Policy went beyond the SEC's

regulatory mandate by
involving the agency in foreign
policy and national security
matters
Inappropriate to dedicate
special resources to a
particular kind of taboo
business activity
Inappropriate to single out

organizations involved with
one issue and not others
Auditing
A quality assurance and Provides absolute assurance about the internalStudy
improvement program is audit function
designed to do all of the
following EXCEPT:
Enables an evaluation of the

internal audit activity's
conformance with the
Definition of Internal Auditing
and the Standards
Enables an assessment of the

efficiency and effectiveness of
the internal audit activity
Provides absolute assurance

about the internal audit
function
Enables an evaluation of
whether internal auditors apply
the Code of Ethics
Auditing
Which of the following is false Ongoing monitoring does not use processes, tools,
Study
regarding ongoing and information necessary to evaluate conformance

monitoring?
with mandatory guidance
Ongoing monitoring does not
use processes, tools, and
information necessary to
evaluate conformance with
mandatory guidance
Internal assessments must
include ongoing monitoring of
the performance of the internal
audit activity
Ongoing monitoring is an
integral part of the day-to-day
supervision, review, and
measurement of the internal
audit activity
Ongoing monitoring is
incorporated into the routine
policies and practices used to
manage the internal audit
activity.
Auditing
Which of the following is false The CAE does not need to discuss potential Study
regarding external conflicts of interest with the external assessor or

assessments?
assessment team
The CAE must discuss with the
board the qualifications and
independence of the external
assessor or assessment team
The CAE does not need to

discuss potential conflicts of
interest with the external
assessor or assessment team
The CAE must discuss with the

board the form and frequency
of the external assessment
External assessments must be

conducted at least once every
five years by a qualified
independent assessor or
assessment team from outside
the organization.
The CAE must communicate Stockholders

the results of the quality
assurance program and
disclose any nonconformance
to all of the following EXCEPT:
Senior Management
Stockholders
Board
Auditing
When can a CAE state that the Only when the results of the quality assurance and
Study
internal audit activity conforms improvement program support the statement

to the International Standards
for the Professional Practice of
Internal Auditing?
Only when the results of the

quality assurance and
improvement program support
the statement
Only when the board approves

the statement
Only when internal

assessments supports the
statement
Only when an external

assessment supports the
statement

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12/16/21, 8:30 PM Auditing Flashcards | Quizlet

Social Sciences / Sociology / Management

Which is not part of the Implementation Guidance

Definition of Internal Auditing

International Standards for the

Which is not part of the Confidentiality

Objective Assurance Activity

If the first digit of a Standard is Performance

Principles for the Professional

Provides error free judgment

An internal auditor who Integrity

An internal auditor who Objectivity

An internal auditor who does Competency

information for personal gain

An internal auditor who does Objectivity

The group controlled Japan's

For hundreds of years it was

The group effectively

The group advised the

Ministry of Finance (MOF)?

MOF hand picked individuals

The MOF was not held

The MOF controlled large

Low audit fees in Japan Improved profitability for Japanese firms

Less profitable engagements

Improved profitability for

Severe scope limitations on

Some Japanese auditors Low audit fee payments

Low audit fee payments

credibility crisis for Japan's profession

Abrupt failures of financial

MOF's failure to impose

New regulatory structure for

Which is not a limitation of Absolute assurance of achievement of entity

Cost verses benefit

Errors, mistakes, or faulty

Which is not a risk response of Align mission with risk appetite

Align mission with risk appetite

(ERM) attempts to maximize

Helps strike an optimal

Helps ensure compliance with

Helps ensure effective

Helps avoid damage to

After the organization Assess impact of the event

Design risk responses for the

Assess risk responses for the

Assess likelihood of the event

Assess impact of the event

made for events for

Low impact opportunities with

High impact threats with a low

Low impact threats with a high

Critics were concerned that Non union

Violation of countries' labor

Nike's production facilities Korea

required "business partners" to

Pay no less than the minimum

Satisfy U.S. labor standards

Fully compensate workers for

Refusal to pay wages for

Excessive noise levels and

Inadequate ventilation systems