AUD O – Auditing and Assurance Principles

QUIZ Compilation (Finals)

QUIZ 6_Considerartion of Internal Control 
1. The following people at every level of organization do not accomplish internal control, except;
A. Auditors and Entity’s Management
B. Entity’s Staff and Personnel
C. Committee of Sponsoring Organizations
D. None of the Choices
2. First Statement: Internal control system in small business tend to be weak compared to the internal
control systems of larger entities. These weaknesses, however, can be compensated if the
owner/manager actively participates in the operations of the business.
Second Statement: Although external control policies and procedures vary significantly from one
entity to another.
A. Both statements are correct
B. Both statements are wrong
C. The first statements is correct, and the second statement is wrong
D. The first statements is wrong, and the second statement is correct
3. First Statement: Most of the internal controls tend to be directed at non-routine transactions rather
than routine transactions.
Second Statement: The effectiveness of internal control may be affected by the inherent limitations.
A. Both statements are correct
B. Both statements are wrong
C. The first statements is correct, and the second statement is wrong
D. The first statements is wrong, and the second statement is correct
4. These are the interrelated components of the entity’s internal control, except;
A. Control Activities
B. Control Risk
C. Control Environment
D. Monitoring
5. When obtaining understanding of the entities internal control, the auditor should obtain knowledge
about the systems
Design; Implementation; Operating Effectiveness
A. yes; yes; yes
B. yes; yes; no
C. yes; no; no
D. no; no; yes
6. It is the process of evaluating he design and operating effectiveness of an entity’s internal control as
to how it detects or prevents material misstatements in the financial statements.
A. Assessing Control Risk
B. Determining Acceptable Level of Detection Risk
C. Assessing Inherent Risk
D. Setting Desired Level of Audit Risk
7. Which of the following does an auditor least likely perform in assessing audit risk?
A. Gather audit evidence in support of record transactions
B. Obtain an understanding of the client system of internal control
C. Understand the economic substance of significant transactions completed by the client
D. Understand the entity in the industry in which it operates
8. First Statement: Communicating significant deficiencies in internal control orally in the first instance
to management and those charged with governance, relieves the auditor of their responsibility to
communicate the significant deficiencies in writing.
Second Statement: The auditor is required to report to the appropriate level of management and
those charged with governance any significant deficiencies in the internal control systems which have
come to the auditor’s attention, but it is not the auditor’s responsibility to obtain for internal control
weaknesses.
A. Both statements are correct
B. Both statements are wrong
C. The first statements is correct, and the second statement is wrong
D. The first statements is wrong, and the second statement is correct
9. Provides a framework for planning, directing, and controlling the entity’s operations.
A. Organizational Structure
B. Information Processing
C. Commitment to competence
D. Integrity and ethical values
10.When obtaining an understanding of the accounting and internal systems to plan the audit, the
auditor should obtain knowledge about the
Design; operation of accounting and internal control
A. yes; yes
B. yes; no
C. no; no
D. no; yes
11. As a result of the auditor’s consideration of the accounting and internal control systems, the auditor
may become aware of significant deficiencies in the entity’s internal control systems. If it happens, the
auditor is required:
A. To communicate it to the CPA
B. To communicate it to the management of the client
C. To ignore it because auditors are not required to search for and/or identify internal control
deficiencies
D. To communicate it to the public (internet users)
12. First Statement: One of the inherent limitations that may affect the internal control’s effectiveness is
the possibility of management supporting the inherent control.
Second Statement: Assessing the level of control risk comes next year after the auditor has
determined the desired level of audit and assessed the level of inherent risk.
A. Both statements are correct
B. Both statements are wrong
C. The first statements is correct, and the second statement is wrong
D. The first statements is wrong, and the second statement is correct
13. Which of the following statement is incorrect about walk through test?
A. It involves tracing a few transactions through the accounting system
B. This procedure may form part of test of control
C. The nature and extent of walkthrough test performed by the auditor are you such that
day alone would provide sufficient appropriate audit evidence to support a low
assessment of control risk
D. This procedure is performed to determine whether the controls are being implemented
14.Obtaining knowledge about whether the control is implemented can best be obtained by
A. Inquiry of client’s personnel
B. Reading procedures manual
C. Tracing transactions through the information system relevant to financial reporting
 D. Performing test of control
15.Communication of internal control weaknesses can be done:
A. Before the authorization to issue the financial statements is made
B. Before or after the financial statements authorization to issue
C. After the issuance of auditor’s report
D. Before or after the auditor’s report is issued
16.First Statement: Internal Control is a means of achieving the entity’s objectives – not an end in itself.
Second Statement: Out of the three categories of the entity’s objectives, Financial Reporting Objective
is the most relevant to the audit.
A. Both statements are correct
B. Both statements are wrong
C. The first statements is correct, and the second statement is wrong
D. The first statements is wrong, and the second statement is correct
17.It includes the attitudes, awareness, and actions of management and those charged with governance
concerning the entity’s internal control and its importance in the entity.
A. Risk Assessment
B. Control Activities
C. Control Environment
D. Information and Communication systems
18.Auditors are required to search for and/or identify internal control deficiencies and to communicate
these to the client’s management
FALSE
19. First Statement: Management should establish ethical standards that discourage employees from
engaging in dishonest, unethical, or illegal acts that could materially affect the financial statement.
Second Statement: The entity should consider the level of competence required for each task and
translate it to requisite knowledge and skills.
A. Both statements are correct
B. Both statements are wrong
C. The first statements is correct, and the second statement is wrong
D. The first statements is wrong, and the second statement is correct
20.The auditor may communicate internal control deficiencies orally to the management and to the
board of directors, when appropriate, to assist them in taking remedial action to minimize the risks of
material misstatement
TRUE

QUIZ 7_ Auditing in a Computerized Environment