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Chapter 08
Student: ___________________________________________________________________________
1. Assessing control risk at less than high involves all of the following except:
A. identifying specific controls to rely on.
B. concluding that controls are ineffective.
C. performing tests of controls.
D. analysing the achieved level of control risk after performing tests of controls.
2. Obtaining an understanding of the internal control and assessing control risk:

A. may be performed concurrently in an audit.
B. needs to be documented only if the assessed level is less than high.
C. is possible but not necessary in performing an audit.
D. is necessarily sequential audit steps.
3. Tests of controls are performed to determine whether or not:

A. control policies and procedures are functioning as designed.
B. necessary controls are absent.
C. incompatible functions exist.
D. material dollar misstatements exist.
4. The conclusion reached as a result of assessing control risk is referred to as the:

A. assurance provided by internal control.
B. determined level of acceptable detection risk.
C. product of the understanding of internal control.
D. assessed level of control risk.
5. An auditor assesses the level of control risk to:

A. determine the extent of tests of controls to be performed.
B. determine the extent of substantive tests to be performed.
C. ascertain whether irregularities are probable.
D. ascertain whether any employees have incompatible duties.
6. How does the extent of substantive tests required to constitute sufficient appropriate audit evidence vary
with the auditor's
assessment of control risk?
A. Randomly.
B. Disproportionately.
C. Directly.
D. Inversely.
7. After obtaining an understanding of internal control in an audit engagement, the auditor should perform tests
of controls on:
A. those control activities for which reportable conditions were identified.
B. a random sample of the control activities that were identified.
C. those control activities that have a material effect upon the financial report balances.
D. those control activities that the auditor identified to reduce the assessed level of control risk.
8. The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the:
A. factors that raise doubts about the auditability of the financial report.
B. operating effectiveness of internal control policies and procedures.
C. risk that material misstatements exist in the financial report.
D. possibility that the nature and extent of substantive tests may be reduced.
9. Assessing control risk as less than high would most likely involve:
A. changing the timing of substantive tests by omitting interim testing and performing the tests at year-end.
B. identifying specific internal controls relevant to specific assertions.
C. performing more extensive substantive tests with larger sample sizes than originally planned.
D. reducing inherent risk for most of the assertions relevant to significant account balances.
10. A primary purpose of internal controls is to:

A. form a basis for evaluating employees.
B. monitor production quality.
C. avoid clerical errors.
D. meet objectives of maintaining sound documents and records and accurate financial reporting.
11. The basic concept of internal control which recognises that the cost of internal control should not exceed
the benefits expected
to be derived is known as:
A. reasonable assurance.
B. management responsibility.
C. limited liability.
D. management by exception.
12. When obtaining an understanding of the entity and its environment, the auditor should obtain an
understanding of internal
controls primarily to:
A. assess the risk of material misstatement and plan the audit.
B. provide suggestions for improvement to the client.
C. serve as a basis for setting audit risk and materiality.
D. comply with the Corporations Act 2001.
13. Which of the following would be least likely to suggest to an auditor that the client's management may
have overridden
the internal control?
A. Differences are always disclosed on a computer exception report.
B. Management does not correct internal control deficiencies that it knows about.
C. There have been two new controllers this year.
D. There are numerous delays in preparing timely internal financial reports.
14. In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance
that:
A. controls have not been circumvented by collusion.
B. misstatements have been prevented or detected.
C. operational efficiency has been achieved in accordance with management plans.
D. management cannot override the system.
15. Of the following statements about an internal control, which one is not valid?
A. No one person should be responsible for the custodial responsibility and the recording responsibility for an
asset.
B. Transactions must be properly authorised before such transactions are processed.
C. Because of the cost–benefit relationship, a client may apply control procedures on a test basis.
D. Control procedures reasonably ensure that collusion among employees cannot occur.
16. Which of the following statements about internal control is correct?
A. The establishment and maintenance of internal control is an important responsibility of the internal auditor.
B. Properly maintained internal control reasonably ensures that collusion among employees cannot occur.
C. The cost-benefit relationship is a primary criterion that should be considered in designing internal control.
D. Exceptionally strong internal control is enough for the auditor to eliminate substantive tests on a significant
account balance.
17. For internal control purposes, which of the following individuals should preferably be responsible for the
distribution of payroll cheques?
A. Bookkeeper.
B. Payroll clerk.
C. Cashier.
D. Receptionist.
18. Which of the following is one of the overriding principles of internal control?
A. Responsibility for accounting and financial duties should be assigned to one responsible officer.
B. Responsibility for the performance of each duty must be fixed.
C. Responsibility for the accounting duties must be borne by the audit committee of the company.
D. All of the options listed here are correct
19. For effective internal control purposes, which of the following individuals should be responsible for
mailing signed cheques?
A. Computer operator.
B. Financial controller.
C. Accounts payable clerk.
D. Payroll clerk.
20.
Peter Budd, the purchasing officer of Lake Hardware Wholesalers Pty Ltd (Lake), has a relative who owns a retail hardware store. Peter Budd
arranged for hardware to be delivered by manufacturers to the retail store on a COD basis, thereby enabling his relative to buy at Lake's wholesale
prices. Budd was probably able to accomplish this because of Lake's poor internal control for:
A. purchase requisitions.
B. cash receipts.
C. perpetual inventory records.
D. purchase orders.
21. A company policy should clearly indicate that defective merchandise returned by customers is to be
delivered to the:
A. sales clerk.
B. receiving clerk.
C. inventory control clerk.
D. accounts receivable clerk.
22. An effective internal control for the payroll function would generally include which of the following?
A. Total time recorded on time-clock cards should be reconciled to job reports by employees responsible for
those specific jobs.
B. Payroll department employees should be supervised by the management of the personnel department.
C. Payroll department employees should be responsible for maintaining employee personnel records.
D. Total time spent on jobs should be compared with total time indicated on time-clock cards.
23. An auditor reviews a client's payroll procedures. The auditor would consider the internal control to be less
than effective
if a payroll department supervisor was assigned the responsibility for:
A. reviewing and approving time reports for subordinate employees.
B. distributing payroll cheques to employees.
C. hiring subordinate employees.
D. initiating requests for salary adjustments for subordinate employees.
24. 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:
A. external policies established by parties outside the entity affect its accounting practices.
B. management is dominated by one individual.
C. internal auditors have direct access to the board of directors and the entity's management.
D. the audit committee is active in overseeing the entity's financial reporting policies.
25. The control environment component of internal controls includes all of the following except:
A. management's operating style.
B. access to computer programs.
C. organisational structure.
D. human resource policies and practices.
26. The risk assessment component of internal controls refers to:
A. the auditor's assessment of control risk.
B. the auditor's assessment of engagement risk.
C. the entity's identification and analysis of risks relevant to achievement of its objectives.
D. the entity's monitoring of the potential for material misstatements.
27. Which of the following is not one of the five elements of internal control?
A. Corporate governance.
B. Control procedures.
C. Control environment.
D. Information system.
28. The internal control environment includes all of the following except:
A. organisational structure.
B. management philosophy and operating style.
C. human resource policies and procedures.
D. tests of control.
29. Transaction authorisation within an organisation may be either specific or general. An example of specific
transaction
authorisation is the:
A. setting of automatic reorder points for material or merchandise.
B. approval of a detailed construction budget for a warehouse.
C. establishment of requirements to be met in determining a customer's credit limits.
D. establishment of sales prices for products to be sold to any customer.
30. An effective internal control requires organisational independence of departments. Organisational

independence would be
impaired in which of the following situations?
A. The internal auditors report to the audit committee of the board of directors.
B. The financial controller reports to the marketing director.
C. The payroll accounting department reports to the chief accountant.
D. The cashier reports to the treasurer.
31. A well-prepared flowchart should make it easier for the auditor to:
A. prepare audit procedure manuals.
B. prepare detailed job descriptions.
C. perform walkthroughs.
D. assess the degree of accuracy of financial data.
32. A flowchart is most frequently used by an auditor in connection with the:
A. preparation of generalised computer audit programs.
B. review of the client's internal accounting controls.
C. use of statistical sampling in performing an audit.
D. performance of analytical procedures on account balances.
33. An advantage of using systems flowcharts to document information about internal control instead of using
internal control
questionnaires is that systems flowcharts:
A. identify internal control weaknesses more prominently.
B. provide a visual depiction of clients' activities.
C. indicate whether controls are operating effectively.
D. reduce the need to observe clients' employees performing routine tasks.
34. For a complex system, auditors are least likely to use which of the following when documenting their
understanding
of internal controls?
A. Narratives.
B. Internal control questionnaires.
C. Flowcharts.
D. Organisation charts.
35. Walk-throughs usually involve all of the following audit procedures except:
A. re-performance.
B. inquiry.
C. observation.
D. inspection.
36. Which of the following is not a reason to assess control risk as high?
A. Internal control policies or procedures are unlikely to be effective.
B. Evaluating the effectiveness of the internal control policies or procedures would be more time consuming
than
another audit approach.
C. The auditor has assessed detection risk as high.
D. Internal control policies or procedures are unlikely to pertain to an assertion.
37. In obtaining an understanding of the internal control policies and procedures that are relevant to audit
planning, the auditor
should perform procedures to provide sufficient knowledge of:
A. design of the relevant policies, procedures and records and their operating effectiveness.
B. design of the relevant policies, procedures and records and their relationships to assertions.
C. the complexity of the entity and the sophistication of its systems and operations.
D. design of the relevant policies, procedures and records and whether they have been placed in operation.
38. Which of the following is not a medium that can normally be used by an auditor to record information
concerning a
client's internal control?
A. Narrative memorandum.
B. Procedures manual.
C. Flowchart.
D. Decision table.
39. When the auditor has assessed the level of control risk at less than high, the auditor should document:
A. the understanding of the entity's internal control elements obtained to plan the audit.
B. the conclusion and the basis for that conclusion.
C. the implications for the overall audit strategy.
D. All of the given answers are correct.
40. Procedures directed towards obtaining evidence concerning the effectiveness of the design or operation of
an internal control
policy or procedure are referred to as:
A. analytical procedures.
B. substantive tests.
C. tests of controls.
D. confirmations.
41. The auditor observes client employees in obtaining an understanding of the internal control in order to:
A. prepare a flowchart.
B. update information contained in the organisation and procedure manuals.
C. corroborate the information obtained during the initial phases of obtaining an understanding of the internal
control.
D. determine the extent of compliance with quality control standards.
42. The following are steps in the audit process:
I. prepare flowchart.
II. gather exhibits of all documents.
III. interview personnel.
The most logical sequence of steps is:

A. I, II, III.
B. I, III, II.
C. III, II, I.
D. II, I, III.
43. The auditor's understanding of the client's internal control is documented to substantiate:
A. conformity of the accounting records with the accounting standards.
B. representation as to adherence to requirements of management.
C. compliance with the auditing standards.
D. the fairness of the financial report presentation.
44. After the auditor has prepared a flowchart of the accounting system and control procedures surrounding
sales, and assessed
the design of the system, the auditor would perform tests of controls for all control procedures:
A. documented in the flowchart.
B. considered to be deficiencies that might allow errors to enter the accounting system.
C. considered to be strengths that the auditor plans to use as a basis for an assessed level of control risk less
than high.
D. that would aid in preventing irregularities.
45. Which of the following internal control features would an auditor be least likely to review?
A. Segregation of the asset-handling and record-keeping functions.
B. Company policy regarding credit and collection efforts.
C. Classification of sales and cost records by products.
D. Authorisation of additions to plant and equipment.
46. When considering the internal control for inventory with respect to segregation of duties, an auditor would
be least likely to:
A. inspect documents.
B. make inquiries.
C. observe procedures.
D. consider policy and procedure manuals.
47.
In the weekly computer run to prepare payroll cheques, a cheque was printed for an employee whose employment was terminated the previous
week. Which of the following controls, if properly used, would have been most effective in preventing this error or ensuring its prompt detection?
A. A control total for hours worked, prepared from time cards collected by the timekeeping department
and compared to the payroll sheets.
B. Requiring the accounting department to account for all pre-numbered cheques issued to the IT department
for the processing of the payroll.
C. The use of check digits on employee numbers.
D. The use of a header label on the payroll input sheet.
48. The auditor obtains evidence supporting the notion that proper segregation of duties exists by:
A. personally observing the employees who apply the control procedures.
B. reviewing job descriptions in the personnel department.
C. preparing a flowchart of duties performed by personnel.
D. performing tests to determine whether control procedures operated consistently throughout the period.
49. Which of the following is essential to determine whether effective internal control policies and procedures
have been
prescribed and are being followed?
A. Developing questionnaires and checklists.
B. Understanding control policies directed towards operating efficiency.
C. Understanding the internal control and performing tests of controls.
D. Observing employee functions and making inquiries.
50. Which of the following input controls is a numeric value computed to provide assurance that the original
value has not been
altered in construction or transmission?
A. Hash total.
B. Parity check.
C. Encryption.
D. Check digit.
51. A limit test is a:

A. test to ensure that a numerical value does not exceed some predetermined value.
B. check to ensure that the value in a field falls within an allowable range of values.
C. check to ensure that the data in a field have the proper arithmetic sign.
D. check on a field to ensure that it contains either all numeric or alphabetic characters.
52. An IT input control is designed to ensure that:
A. machine processing is accurate.
B. only authorised personnel have access to the computer area.
C. data received for processing are properly authorised and converted to machine readable form.
D. electronic data processing has been performed as intended for the particular application.
53. For good internal control, which of the following functions should not be the responsibility of the treasurer's
department?
A. Data processing.
B. Handling of cash.
C. Custody of securities.
D. Establishing credit policies.
54. In updating a computerised accounts receivable file, which one of the following would be used as a batch
control to verify
the accuracy of the postings of cash receipts remittances?
A. The sum of the cash deposits, plus the discounts, less the sales returns.
B. The sum of the cash deposits.
C. The sum of the cash deposits, less the discounts taken by customers.
D. The sum of the cash deposits, plus the discounts taken by customers.
55.
After obtaining an initial understanding of a client's IT controls, an auditor may decide not to perform tests of controls related to the control
procedures within the IT portion of the client's internal control. Which of the following would not be a valid reason for choosing to omit tests of
controls?
A. The controls appear adequate.

B. The controls duplicate operative controls existing elsewhere in the system.
C. There appear to be major deficiencies that would preclude using the stated procedure as a basis to reduce
the assessed level.
D. The time and dollar costs of testing exceed the time and dollar savings in substantive testing if the tests
of controls show the controls to be operative.
56. Which of the following computer documentation would an auditor most likely utilise in obtaining an
understanding of internal control?
A. Systems flowcharts.
B. Record layouts.
C. Program listings.
D. Record counts.
57. Which of the following situations most likely represents a weakness in IT internal control?
A. The accounts payable clerk prepares data for computer processing and enters the data into the computer.
B. The systems analyst reviews output and controls the distribution of output from the IT department.
C. The control clerk establishes control over data received by the IT department and reconciles control totals
after processing.
D. The systems programmer designs the operating and control functions of programs and participates in testing
operating systems
58. Which of the following would lessen the effectiveness of the internal control in a computer system?
A. The computer librarian maintains custody of computer program instructions and detailed program listings.
B. Computer operators have access to operator instructions and detailed program documentation.
C. The control group maintains sole custody of all computer output before distribution.
D. Computer programmers write and debug.
59. Which of the following is likely to be least important to an auditor who is reviewing the internal control of
the data processing function?
A. Ancillary program functions.
B. Disposition of source documents.
C. Operator competence.
D. Bit storage capacity.
60. Which of the following is likely to be of least importance to an auditor in obtaining an understanding of the
internal control?
A. The segregation of duties within the IT centre.
B. The control over source documents.
C. The documentation maintained for accounting applications.
D. The cost–benefit ratio of data processing operations.
61. A procedural control used in the management of a computer centre to minimise the possibility of data or
program file
destruction through operator error includes:
A. control figures.
B. cross-adding tests.
C. limit checks.
D. external labels.
62. The use of a header label in conjunction with magnetic tape is most likely to prevent errors by the:
A. computer operator.
B. key entry operator.
C. computer programmer.
D. maintenance technician.
63. When erroneous data are detected by computer program controls, such data may be excluded from
processing and printed
on an error report. The error report should most probably be reviewed and followed up by the:
A. IT control group.
B. system analyst.
C. supervisor of computer operations.
D. computer programmer.
64. Internal control procedures within the IT activity may leave no visible evidence indicating that the
procedures were performed.
In such instances, the auditor should test these controls by:
A. making corroborative inquiries.
B. observing the separation of duties of personnel.
C. reviewing transactions submitted for processing and comparing them to related output.
D. reviewing the run manual.
65. Totals of amounts in computer-record data fields that are not usually added, but are used only for
data-processing control
purposes, are called:
A. record totals.
B. hash totals.
C. processing data totals.
D. field totals.
66. Which of the following activities would most likely be performed in the IT department?
A. Initiation of changes to master records.
B. Conversion of information to machine-readable form.
C. Correction of transactional errors.
D. Initiation of changes to existing applications.
67. Which of the following is an example of a check digit?
A. An agreement of the total number of employees to the total number of cheques printed by the computer.
B. An algebraically determined number produced by the other digits of the employee number.
C. A logic test that ensures all employee numbers have nine digits.
D. A limit check that an employee's hours do not exceed 50 hours per work week.
68. For control purposes, which of the following should be organisationally segregated from the computer
operations function?
A. Data conversion.
B. Surveillance of CRT messages.
C. Systems development.
D. Minor maintenance according to a schedule.
69. An input control is designed to ensure that:

C. data received for processing are properly authorised and converted to machine-readable form.
70.
Carmela Department Stores Ltd has a fully integrated IT accounting system and is planning to issue credit cards to credit-worthy customers. To
strengthen the internal control by making it difficult for one to create a valid customer account number, the company's independent auditor has
suggested the inclusion of a check digit that should be placed:
A. at the beginning of a valid account number, only.

B. in the middle of a valid account number, only.
C. at the end of a valid account number, only.
D. consistently in any position.
71. After obtaining an understanding of a client's IT control, an auditor may decide not to perform tests of
controls within the
IT portion of the client's system. Which of the following would not be a valid reason for choosing to omit tests
of controls?
A. There appear to be major deficiencies that preclude reliance on the stated procedure.
B. The time and dollar costs of testing controls exceed the savings in substantive testing if the tests show the
controls to be operative.
C. The controls appear to be adequate and thus can be relied upon in assessing the level of control risk.
D. The controls duplicate controls existing elsewhere in the system.
72. The completeness of IT-generated sales figures can be tested by comparing the number of items listed on
the daily sales
report with the number of items billed on the actual invoices. This process uses:
A. control totals.
B. validity tests.
C. process tracing data.
D. check digits.
73. If a control total were to be computed on each of the following data items, which would best be identified
as a hash total for
a payroll IT application?
A. Hours worked.
B. Employee's identification number.
C. Number of employees.
D. Gross pay.
74. If a control total were to be calculated on each of the following data items, which would best be identified
as a hash total for
A. Net pay.
B. Department numbers.
C. Hours worked.
D. Total debits and total credits.
75. One of the major problems with IT systems is that incompatible functions may be performed by the same
individual.
One compensating control for this is the use of:
A. a tape library.
B. a check-digit system.
C. computer-generated hash totals.
D. a computer log.
76. In which of the following situations would an auditor most likely use a strategy of reliance on internal
control?
A. The systems analyst reviews output and controls the distribution of output from the IT department.
B. The entity has been slow to update its IT system to reflect changes in billing practices.
C. No paper trail is generated, as the entity receives sales orders, bills customers and receives payment based
only on information generated from IT.
D. The auditor has been unable to determine whether all changes to a client's IT were properly authorised.
77.
When an independent auditor decides that the work performed by internal auditors may have a bearing on the nature, timing and extent of
contemplated audit procedures, the independent auditor should plan to evaluate the objectivity of the internal auditors. Relative to objectivity, the
independent auditor should:
A. consider the organisation level to which internal auditors report the results of their work.
B. review the quality control program in effect for the internal audit staff.
C. examine the quality of the internal audit reports.
D. consider the qualifications of the internal audit staff.
78. To provide for the greatest degree of independence in performing internal auditing functions, an internal
auditor most likely
should report to the:
A. chief financial officer.
B. corporate controller.
C. audit committee.
D. shareholders.
79.
Maxi Sales Corp. maintains a large, full-time internal audit staff that reports directly to the chief accountant. Audit reports prepared by the internal
auditors indicate that the structure is functioning as it should be and that the accounting records are reliable. The external auditor will probably:
A. eliminate tests of controls.

B. increase the depth of the procedures to obtain an understanding of controls directed towards operating
efficiency.
C. avoid duplicating the work performed by the internal audit staff.
D. place limited reliance on the work performed by the internal audit staff.
Chapter 08 Key
1. Assessing control risk at less than high involves all of the following except:
A. identifying specific controls to rely on.
B. concluding that controls are ineffective.
C. performing tests of controls.
D. analysing the achieved level of control risk after performing tests of controls.
Chapter - Chapter 08 #1
Difficulty: Easy
Est Time: 1–3 mins
Learning Objective: 8.1 Define internal control, and explain the audit logic of assessing control risk.
Section: Audit strategy and internal control
2. Obtaining an understanding of the internal control and assessing control risk:

A. may be performed concurrently in an audit.
B. needs to be documented only if the assessed level is less than high.
C. is possible but not necessary in performing an audit.
D. is necessarily sequential audit steps.
Difficulty: Easy
3. Tests of controls are performed to determine whether or not:

A. control policies and procedures are functioning as designed.
B. necessary controls are absent.
C. incompatible functions exist.
D. material dollar misstatements exist.
Difficulty: Easy
Learning Objective: 9.1 Understand that tests of controls are undertaken when the auditor intends to rely on a control to reduce a risk of material misstatement.
4. The conclusion reached as a result of assessing control risk is referred to as the:
A. assurance provided by internal control.
B. determined level of acceptable detection risk.
C. product of the understanding of internal control.
D. assessed level of control risk.
Difficulty: Easy
5. An auditor assesses the level of control risk to:

A. determine the extent of tests of controls to be performed.
B. determine the extent of substantive tests to be performed.
C. ascertain whether irregularities are probable.
D. ascertain whether any employees have incompatible duties.
Difficulty: Easy
6. How does the extent of substantive tests required to constitute sufficient appropriate audit evidence vary
with the auditor's
assessment of control risk?
A. Randomly.
B. Disproportionately.
C. Directly.
D. Inversely.
Difficulty: Medium
7. After obtaining an understanding of internal control in an audit engagement, the auditor should perform tests
of controls on:
A. those control activities for which reportable conditions were identified.
B. a random sample of the control activities that were identified.
C. those control activities that have a material effect upon the financial report balances.
D. those control activities that the auditor identified to reduce the assessed level of control risk.
Difficulty: Easy
8. The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the:
A. factors that raise doubts about the auditability of the financial report.
B. operating effectiveness of internal control policies and procedures.
C. risk that material misstatements exist in the financial report.
D. possibility that the nature and extent of substantive tests may be reduced.
Difficulty: Easy
9. Assessing control risk as less than high would most likely involve:
A. changing the timing of substantive tests by omitting interim testing and performing the tests at year-end.
B. identifying specific internal controls relevant to specific assertions.
C. performing more extensive substantive tests with larger sample sizes than originally planned.
D. reducing inherent risk for most of the assertions relevant to significant account balances.
Difficulty: Medium
10. A primary purpose of internal controls is to:

A. form a basis for evaluating employees.
B. monitor production quality.
C. avoid clerical errors.
D. meet objectives of maintaining sound documents and records and accurate financial reporting.

Difficulty: Easy
Learning Objective: 8.2 Understand the concepts of inherent limitations and reasonable assurance with regard to internal control.
Section: Internal control concepts
11. The basic concept of internal control which recognises that the cost of internal control should not exceed
the benefits expected
to be derived is known as:
A. reasonable assurance.
B. management responsibility.
C. limited liability.
D. management by exception.

Difficulty: Easy
12. When obtaining an understanding of the entity and its environment, the auditor should obtain an
understanding of internal
controls primarily to:
A. assess the risk of material misstatement and plan the audit.
B. provide suggestions for improvement to the client.
C. serve as a basis for setting audit risk and materiality.
D. comply with the Corporations Act 2001.

Difficulty: Easy
13. Which of the following would be least likely to suggest to an auditor that the client's management may
have overridden
the internal control?
A. Differences are always disclosed on a computer exception report.
B. Management does not correct internal control deficiencies that it knows about.
C. There have been two new controllers this year.
D. There are numerous delays in preparing timely internal financial reports.

Difficulty: Easy
14. In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance
that:
A. controls have not been circumvented by collusion.
B. misstatements have been prevented or detected.
C. operational efficiency has been achieved in accordance with management plans.
D. management cannot override the system.

Difficulty: Easy
15. Of the following statements about an internal control, which one is not valid?
A. No one person should be responsible for the custodial responsibility and the recording responsibility for an
asset.
B. Transactions must be properly authorised before such transactions are processed.
C. Because of the cost–benefit relationship, a client may apply control procedures on a test basis.
D. Control procedures reasonably ensure that collusion among employees cannot occur.

Difficulty: Easy
16. Which of the following statements about internal control is correct?

A. The establishment and maintenance of internal control is an important responsibility of the internal auditor.
B. Properly maintained internal control reasonably ensures that collusion among employees cannot occur.
C. The cost-benefit relationship is a primary criterion that should be considered in designing internal control.
D. Exceptionally strong internal control is enough for the auditor to eliminate substantive tests on a significant
account balance.

Difficulty: Medium
Learning Objective: 8.3 Describe the general objectives of internal control and how the auditor uses them to develop specific control objectives.
Section: Internal control objectives
17. For internal control purposes, which of the following individuals should preferably be responsible for the
distribution of payroll cheques?
A. Bookkeeper.
B. Payroll clerk.
C. Cashier.
D. Receptionist.

Difficulty: Easy
18. Which of the following is one of the overriding principles of internal control?
A. Responsibility for accounting and financial duties should be assigned to one responsible officer.
B. Responsibility for the performance of each duty must be fixed.
C. Responsibility for the accounting duties must be borne by the audit committee of the company.
D. All of the options listed here are correct

Difficulty: Easy
19. For effective internal control purposes, which of the following individuals should be responsible for
mailing signed cheques?
A. Computer operator.
B. Financial controller.
C. Accounts payable clerk.
D. Payroll clerk.

Difficulty: Easy
20.
Peter Budd, the purchasing officer of Lake Hardware Wholesalers Pty Ltd (Lake), has a relative who owns a retail hardware store. Peter Budd
arranged for hardware to be delivered by manufacturers to the retail store on a COD basis, thereby enabling his relative to buy at Lake's wholesale
prices. Budd was probably able to accomplish this because of Lake's poor internal control for:
A. purchase requisitions.
B. cash receipts.
C. perpetual inventory records.
D. purchase orders.

Difficulty: Easy
21. A company policy should clearly indicate that defective merchandise returned by customers is to be
delivered to the:
A. sales clerk.
B. receiving clerk.
C. inventory control clerk.
D. accounts receivable clerk.

Difficulty: Easy
22. An effective internal control for the payroll function would generally include which of the following?
A. Total time recorded on time-clock cards should be reconciled to job reports by employees responsible for
those specific jobs.
B. Payroll department employees should be supervised by the management of the personnel department.
C. Payroll department employees should be responsible for maintaining employee personnel records.
D. Total time spent on jobs should be compared with total time indicated on time-clock cards.

Difficulty: Easy
23. An auditor reviews a client's payroll procedures. The auditor would consider the internal control to be less
than effective
if a payroll department supervisor was assigned the responsibility for:
A. reviewing and approving time reports for subordinate employees.
B. distributing payroll cheques to employees.
C. hiring subordinate employees.
D. initiating requests for salary adjustments for subordinate employees.

Difficulty: Medium
24. 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:
A. external policies established by parties outside the entity affect its accounting practices.
B. management is dominated by one individual.
C. internal auditors have direct access to the board of directors and the entity's management.
D. the audit committee is active in overseeing the entity's financial reporting policies.

Difficulty: Easy
Learning Objective: 8.4 Identify and define each of the components of internal control.
Section: Components of internal control
25. The control environment component of internal controls includes all of the following except:
A. management's operating style.
B. access to computer programs.
C. organisational structure.
D. human resource policies and practices.

Difficulty: Medium
26. The risk assessment component of internal controls refers to:
A. the auditor's assessment of control risk.
B. the auditor's assessment of engagement risk.
C. the entity's identification and analysis of risks relevant to achievement of its objectives.
D. the entity's monitoring of the potential for material misstatements.

Difficulty: Easy
27. Which of the following is not one of the five elements of internal control?
A. Corporate governance.
B. Control procedures.
C. Control environment.
D. Information system.

Difficulty: Easy
28. The internal control environment includes all of the following except:
A. organisational structure.
B. management philosophy and operating style.
C. human resource policies and procedures.
D. tests of control.

Difficulty: Easy
29. Transaction authorisation within an organisation may be either specific or general. An example of specific
transaction
authorisation is the:
A. setting of automatic reorder points for material or merchandise.
B. approval of a detailed construction budget for a warehouse.
C. establishment of requirements to be met in determining a customer's credit limits.
D. establishment of sales prices for products to be sold to any customer.

Difficulty: Medium
30. An effective internal control requires organisational independence of departments. Organisational
independence would be
impaired in which of the following situations?
A. The internal auditors report to the audit committee of the board of directors.
B. The financial controller reports to the marketing director.
C. The payroll accounting department reports to the chief accountant.
D. The cashier reports to the treasurer.

Difficulty: Easy
31. A well-prepared flowchart should make it easier for the auditor to:
A. prepare audit procedure manuals.
B. prepare detailed job descriptions.
C. perform walkthroughs.
D. assess the degree of accuracy of financial data.

Difficulty: Easy
Learning Objective: 8.5 Identify the steps in a financial report audit by which the auditor obtains an understanding of internal control and assesses control risk, and the
methods and procedures used by the auditor in each step.
Section: Considering internal control in a financial report audit
32. A flowchart is most frequently used by an auditor in connection with the:

A. preparation of generalised computer audit programs.
B. review of the client's internal accounting controls.
C. use of statistical sampling in performing an audit.
D. performance of analytical procedures on account balances.

Difficulty: Easy
33. An advantage of using systems flowcharts to document information about internal control instead of using
internal control
questionnaires is that systems flowcharts:
A. identify internal control weaknesses more prominently.
B. provide a visual depiction of clients' activities.
C. indicate whether controls are operating effectively.
D. reduce the need to observe clients' employees performing routine tasks.

Difficulty: Easy
34. For a complex system, auditors are least likely to use which of the following when documenting their
understanding
of internal controls?
A. Narratives.
B. Internal control questionnaires.
C. Flowcharts.
D. Organisation charts.

Difficulty: Easy
35. Walk-throughs usually involve all of the following audit procedures except:
A. re-performance.
B. inquiry.
C. observation.
D. inspection.

Difficulty: Easy
36. Which of the following is not a reason to assess control risk as high?
A. Internal control policies or procedures are unlikely to be effective.
B. Evaluating the effectiveness of the internal control policies or procedures would be more time consuming
than
another audit approach.
C. The auditor has assessed detection risk as high.
D. Internal control policies or procedures are unlikely to pertain to an assertion.

Difficulty: Medium
37. In obtaining an understanding of the internal control policies and procedures that are relevant to audit
planning, the auditor
should perform procedures to provide sufficient knowledge of:
A. design of the relevant policies, procedures and records and their operating effectiveness.
B. design of the relevant policies, procedures and records and their relationships to assertions.
C. the complexity of the entity and the sophistication of its systems and operations.
D. design of the relevant policies, procedures and records and whether they have been placed in operation.

Difficulty: Medium
38. Which of the following is not a medium that can normally be used by an auditor to record information
concerning a
client's internal control?
A. Narrative memorandum.
B. Procedures manual.
C. Flowchart.
D. Decision table.

Difficulty: Easy
39. When the auditor has assessed the level of control risk at less than high, the auditor should document:
A. the understanding of the entity's internal control elements obtained to plan the audit.
B. the conclusion and the basis for that conclusion.
C. the implications for the overall audit strategy.
D. All of the given answers are correct.

Difficulty: Medium
40. Procedures directed towards obtaining evidence concerning the effectiveness of the design or operation of
an internal control
policy or procedure are referred to as:
A. analytical procedures.
B. substantive tests.
C. tests of controls.
D. confirmations.

Difficulty: Easy
41. The auditor observes client employees in obtaining an understanding of the internal control in order to:
A. prepare a flowchart.
B. update information contained in the organisation and procedure manuals.
C. corroborate the information obtained during the initial phases of obtaining an understanding of the internal
control.
D. determine the extent of compliance with quality control standards.

Difficulty: Easy
42. The following are steps in the audit process:
I. prepare flowchart.
II. gather exhibits of all documents.
III. interview personnel.
The most logical sequence of steps is:

A. I, II, III.
B. I, III, II.
C. III, II, I.
D. II, I, III.

Difficulty: Easy
43. The auditor's understanding of the client's internal control is documented to substantiate:
A. conformity of the accounting records with the accounting standards.
B. representation as to adherence to requirements of management.
C. compliance with the auditing standards.
D. the fairness of the financial report presentation.

Difficulty: Easy
44. After the auditor has prepared a flowchart of the accounting system and control procedures surrounding
sales, and assessed
the design of the system, the auditor would perform tests of controls for all control procedures:
A. documented in the flowchart.
B. considered to be deficiencies that might allow errors to enter the accounting system.
C. considered to be strengths that the auditor plans to use as a basis for an assessed level of control risk less
than high.
D. that would aid in preventing irregularities.

Difficulty: Easy
45. Which of the following internal control features would an auditor be least likely to review?
A. Segregation of the asset-handling and record-keeping functions.
B. Company policy regarding credit and collection efforts.
C. Classification of sales and cost records by products.
D. Authorisation of additions to plant and equipment.

Difficulty: Medium
46. When considering the internal control for inventory with respect to segregation of duties, an auditor would
be least likely to:
A. inspect documents.
B. make inquiries.
C. observe procedures.
D. consider policy and procedure manuals.

Difficulty: Medium
47.
In the weekly computer run to prepare payroll cheques, a cheque was printed for an employee whose employment was terminated the previous
week. Which of the following controls, if properly used, would have been most effective in preventing this error or ensuring its prompt detection?
A. A control total for hours worked, prepared from time cards collected by the timekeeping department
and compared to the payroll sheets.
B. Requiring the accounting department to account for all pre-numbered cheques issued to the IT department
for the processing of the payroll.
C. The use of check digits on employee numbers.
D. The use of a header label on the payroll input sheet.

Difficulty: Medium
48. The auditor obtains evidence supporting the notion that proper segregation of duties exists by:
A. personally observing the employees who apply the control procedures.
B. reviewing job descriptions in the personnel department.
C. preparing a flowchart of duties performed by personnel.
D. performing tests to determine whether control procedures operated consistently throughout the period.

Difficulty: Medium
49. Which of the following is essential to determine whether effective internal control policies and procedures
have been
prescribed and are being followed?
A. Developing questionnaires and checklists.
B. Understanding control policies directed towards operating efficiency.
C. Understanding the internal control and performing tests of controls.
D. Observing employee functions and making inquiries.

Difficulty: Easy
50. Which of the following input controls is a numeric value computed to provide assurance that the original
value has not been
altered in construction or transmission?
A. Hash total.
B. Parity check.
C. Encryption.
D. Check digit.

Difficulty: Easy
Learning Objective: 8.6 Distinguish between user controls and information technology (IT) controls, between general controls and application controls and between
programmed controls and manual controls, and identify the general controls and application controls that affect the auditor’s assessment of control risk in a
computerised system.
Section: Computerised systems
51. A limit test is a:
A. test to ensure that a numerical value does not exceed some predetermined value.
B. check to ensure that the value in a field falls within an allowable range of values.
C. check to ensure that the data in a field have the proper arithmetic sign.
D. check on a field to ensure that it contains either all numeric or alphabetic characters.

Difficulty: Easy
52. An IT input control is designed to ensure that:

C. data received for processing are properly authorised and converted to machine readable form.

Difficulty: Easy
53. For good internal control, which of the following functions should not be the responsibility of the treasurer's
department?
A. Data processing.
B. Handling of cash.
C. Custody of securities.
D. Establishing credit policies.

Difficulty: Easy
54. In updating a computerised accounts receivable file, which one of the following would be used as a batch
control to verify
the accuracy of the postings of cash receipts remittances?
A. The sum of the cash deposits, plus the discounts, less the sales returns.
B. The sum of the cash deposits.
C. The sum of the cash deposits, less the discounts taken by customers.
D. The sum of the cash deposits, plus the discounts taken by customers.

Difficulty: Hard
55.
After obtaining an initial understanding of a client's IT controls, an auditor may decide not to perform tests of controls related to the control
procedures within the IT portion of the client's internal control. Which of the following would not be a valid reason for choosing to omit tests of
controls?
A. The controls appear adequate.

B. The controls duplicate operative controls existing elsewhere in the system.
C. There appear to be major deficiencies that would preclude using the stated procedure as a basis to reduce
the assessed level.
D. The time and dollar costs of testing exceed the time and dollar savings in substantive testing if the tests
of controls show the controls to be operative.

Difficulty: Easy
56. Which of the following computer documentation would an auditor most likely utilise in obtaining an
understanding of internal control?
A. Systems flowcharts.
B. Record layouts.
C. Program listings.
D. Record counts.

Difficulty: Easy
57. Which of the following situations most likely represents a weakness in IT internal control?
A. The accounts payable clerk prepares data for computer processing and enters the data into the computer.
B. The systems analyst reviews output and controls the distribution of output from the IT department.
C. The control clerk establishes control over data received by the IT department and reconciles control totals
after processing.
D. The systems programmer designs the operating and control functions of programs and participates in testing
operating systems

Difficulty: Hard
58. Which of the following would lessen the effectiveness of the internal control in a computer system?
A. The computer librarian maintains custody of computer program instructions and detailed program listings.
B. Computer operators have access to operator instructions and detailed program documentation.
C. The control group maintains sole custody of all computer output before distribution.
D. Computer programmers write and debug.

Difficulty: Hard
59. Which of the following is likely to be least important to an auditor who is reviewing the internal control of
the data processing function?
A. Ancillary program functions.
B. Disposition of source documents.
C. Operator competence.
D. Bit storage capacity.

Difficulty: Easy
60. Which of the following is likely to be of least importance to an auditor in obtaining an understanding of the
internal control?
A. The segregation of duties within the IT centre.
B. The control over source documents.
C. The documentation maintained for accounting applications.
D. The cost–benefit ratio of data processing operations.

Difficulty: Easy
61. A procedural control used in the management of a computer centre to minimise the possibility of data or
program file
destruction through operator error includes:
A. control figures.
B. cross-adding tests.
C. limit checks.
D. external labels.

Difficulty: Easy
62. The use of a header label in conjunction with magnetic tape is most likely to prevent errors by the:
A. computer operator.
B. key entry operator.
C. computer programmer.
D. maintenance technician.

Difficulty: Easy
63. When erroneous data are detected by computer program controls, such data may be excluded from
processing and printed
on an error report. The error report should most probably be reviewed and followed up by the:
A. IT control group.
B. system analyst.
C. supervisor of computer operations.
D. computer programmer.

Difficulty: Easy
64. Internal control procedures within the IT activity may leave no visible evidence indicating that the
procedures were performed.
In such instances, the auditor should test these controls by:
A. making corroborative inquiries.
B. observing the separation of duties of personnel.
C. reviewing transactions submitted for processing and comparing them to related output.
D. reviewing the run manual.

Difficulty: Medium
65. Totals of amounts in computer-record data fields that are not usually added, but are used only for
data-processing control
purposes, are called:
A. record totals.
B. hash totals.
C. processing data totals.
D. field totals.

Difficulty: Easy
66. Which of the following activities would most likely be performed in the IT department?
A. Initiation of changes to master records.
B. Conversion of information to machine-readable form.
C. Correction of transactional errors.
D. Initiation of changes to existing applications.

Difficulty: Easy
67. Which of the following is an example of a check digit?

A. An agreement of the total number of employees to the total number of cheques printed by the computer.
B. An algebraically determined number produced by the other digits of the employee number.
C. A logic test that ensures all employee numbers have nine digits.
D. A limit check that an employee's hours do not exceed 50 hours per work week.

Difficulty: Easy
68. For control purposes, which of the following should be organisationally segregated from the computer
operations function?
A. Data conversion.
B. Surveillance of CRT messages.
C. Systems development.
D. Minor maintenance according to a schedule.

Difficulty: Medium
69. An input control is designed to ensure that:
C. data received for processing are properly authorised and converted to machine-readable form.

Difficulty: Easy
70.
Carmela Department Stores Ltd has a fully integrated IT accounting system and is planning to issue credit cards to credit-worthy customers. To
strengthen the internal control by making it difficult for one to create a valid customer account number, the company's independent auditor has
suggested the inclusion of a check digit that should be placed:
A. at the beginning of a valid account number, only.

B. in the middle of a valid account number, only.
C. at the end of a valid account number, only.
D. consistently in any position.

Difficulty: Easy
71. After obtaining an understanding of a client's IT control, an auditor may decide not to perform tests of
controls within the
IT portion of the client's system. Which of the following would not be a valid reason for choosing to omit tests
of controls?
A. There appear to be major deficiencies that preclude reliance on the stated procedure.
B. The time and dollar costs of testing controls exceed the savings in substantive testing if the tests show the
controls to be operative.
C. The controls appear to be adequate and thus can be relied upon in assessing the level of control risk.
D. The controls duplicate controls existing elsewhere in the system.

Difficulty: Easy
72. The completeness of IT-generated sales figures can be tested by comparing the number of items listed on
the daily sales
report with the number of items billed on the actual invoices. This process uses:
A. control totals.
B. validity tests.
C. process tracing data.
D. check digits.

Difficulty: Easy
73. If a control total were to be computed on each of the following data items, which would best be identified
as a hash total for
A. Hours worked.
B. Employee's identification number.
C. Number of employees.
D. Gross pay.

Difficulty: Easy
74. If a control total were to be calculated on each of the following data items, which would best be identified
as a hash total for
A. Net pay.
B. Department numbers.
C. Hours worked.
D. Total debits and total credits.

Difficulty: Easy
75. One of the major problems with IT systems is that incompatible functions may be performed by the same
individual.
One compensating control for this is the use of:
A. a tape library.
B. a check-digit system.
C. computer-generated hash totals.
D. a computer log.

Difficulty: Medium
76. In which of the following situations would an auditor most likely use a strategy of reliance on internal
control?
A. The systems analyst reviews output and controls the distribution of output from the IT department.
B. The entity has been slow to update its IT system to reflect changes in billing practices.
C. No paper trail is generated, as the entity receives sales orders, bills customers and receives payment based
only on information generated from IT.
D. The auditor has been unable to determine whether all changes to a client's IT were properly authorised.

Difficulty: Hard
77.
When an independent auditor decides that the work performed by internal auditors may have a bearing on the nature, timing and extent of
contemplated audit procedures, the independent auditor should plan to evaluate the objectivity of the internal auditors. Relative to objectivity, the
independent auditor should:
A. consider the organisation level to which internal auditors report the results of their work.
B. review the quality control program in effect for the internal audit staff.
C. examine the quality of the internal audit reports.
D. consider the qualifications of the internal audit staff.

Difficulty: Medium
Learning Objective: 8.7 Explain the role of the internal audit function in internal control and how it may affect the audit.
Section: Considering the work of an internal auditor
78. To provide for the greatest degree of independence in performing internal auditing functions, an internal
auditor most likely
should report to the:
A. chief financial officer.
B. corporate controller.
C. audit committee.
D. shareholders.

Difficulty: Easy
79.
Maxi Sales Corp. maintains a large, full-time internal audit staff that reports directly to the chief accountant. Audit reports prepared by the internal
auditors indicate that the structure is functioning as it should be and that the accounting records are reliable. The external auditor will probably:
A. eliminate tests of controls.

B. increase the depth of the procedures to obtain an understanding of controls directed towards operating
efficiency.
C. avoid duplicating the work performed by the internal audit staff.
D. place limited reliance on the work performed by the internal audit staff.

Difficulty: Medium
Chapter 08 Summary
Category # of
Ques
tions
Chapter - Chapter 08 79
Difficulty: Easy 57
Difficulty: Hard 4
Difficulty: Medium 18
Est Time: 1–3 mins 79
Learning Objective: 8.1 Define internal control, and explain the audit logic of assessing control risk. 9
Learning Objective: 8.2 Understand the concepts of inherent limitations and reasonable assurance with regard to internal control. 6
Learning Objective: 8.3 Describe the general objectives of internal control and how the auditor uses them to develop specific control objec 8
tives.
Learning Objective: 8.4 Identify and define each of the components of internal control. 7
Learning Objective: 8.5 Identify the steps in a financial report audit by which the auditor obtains an understanding of internal control and a 19
ssesses control risk, and the methods and procedures used by the auditor in each step.
Learning Objective: 8.6 Distinguish between user controls and information technology (IT) controls, between general controls and applicat 27
ion controls and between programmed controls and manual controls, and identify the general controls and application controls that affect t
he auditor’s assessment of control risk in a computerised system.
Learning Objective: 8.7 Explain the role of the internal audit function in internal control and how it may affect the audit. 3
Learning Objective: 9.1 Understand that tests of controls are undertaken when the auditor intends to rely on a control to reduce a risk of m 1
aterial misstatement.
Section: Audit strategy and internal control 9
Section: Components of internal control 7
Section: Computerised systems 27
Section: Considering internal control in a financial report audit 19
Section: Considering the work of an internal auditor 3
Section: Internal control concepts 6
Section: Internal control objectives 8
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acquaintance, near the Bridge. Thus relieved of their anxiety, they
could now listen with interest, to the details of old Sam. “The regulars
will be starved out, by and by,” said he, “if they don’t get scared to
death first. They say that three of their generals, as they were
walking down Beacon Hill, the other night, heard strange noises over
their heads, which they supposed to be some kind of airguns, fired at
them by the Yankee rebels, as they called them, and took to their
heels with such expedition that they nearly fell headlong; but, after
all,” said he, with an explosion of great glee, “it was only the
humming of beetles, and if they run for such imaginations, what will
they do when they stand, face to face, with our brave boys? And,
there is a plan afoot, which will soon settle the business; it is to erect
works on the hill in Charlestown, which overlooks Boston, so that our
men can fire in among them.” He then proceeded to say that the
British would not permit the inhabitants of Boston to leave the town,
or hold any communication with their friends; that it was said
reinforcements from England were daily expected, and that the
Americans were anxious to strike some bold stroke, before their
arrival. More than all, he reported, that George Washington, of
Virginia, was appointed Commander in Chief of the American
Armies, “and a noble commander it is said he will make, being an old
soldier, and, that it will not be long before he will be before Boston.”
The heart of the affectionate mother throbbed with anxiety at these
tidings. Situated as they were, in the very seat of contention, what
would be the result if the enemy were victorious, and succeeded in
dispersing her countrymen, and what would become of her, and her
helpless little family? Anticipating such an emergency, her husband,
in his last letter, had directed her to leave their home, and, with her
little girls, retire to her native place, which was about forty miles in
the interior, there to await his return, or the indications of Providence.
With a heavy heart, after taking the advice of the good Prudy, who,
with disinterested affection, offered to stay at the mansion as long as
it was safe, she determined that the crisis which her husband had
foreseen, had now arrived, and that she would follow his directions.
“If,” said her faithful domestic, “it comes to the worst, Sam and I can
shut up the house, turn out the cattle, and retire over the hill to his
sister’s, where we shall be safe, but, it would not do for you, with
these little ones, to run such a risk. You can now go with safety in the
old chaise; which is roomy enough to hold considerable, and, you
will not be afraid to drive the horse, who, tho’ not swift, is sure.”
Having come to this resolution, no time was to be lost, and they
immediately commenced preparations for the journey.
The morning arrived when she must bid farewell to the scene of so
much peace and quiet domestic joy, perhaps never again to see it,
for she could not conceal from herself that fire and sword were the
accompaniments of modern warfare; but her children, delighted at
the journey, would not suffer a shade to linger upon her brow, and
Prudy, amidst smiles and tears, uttered her affectionate adieu,
echoed by Sam. The day was beautiful, and the wild enthusiasm of
her companions prevented her indulgence in melancholy reflections,
while the road led them away from the scenes of tumult and
confusion, and she trusted they might escape observation. She was
not disappointed; night brought them to the home of her youth,
where a joyous welcome awaited them, and until better times, a
peaceful retreat.
“And now,” said Mrs. Wilson, “I must leave my farther tale untold.
Perhaps at some future time I may continue it, and I think it will
interest you, as the incidents are connected with your family.” “I had
hoped, mother,” said Charles, that you would tell us about Bunker
Hill.” “I should not be a good historian, my son, in tales of war and
bloodshed. Charlestown was burned by the British, as you know, but
their devastations stopped there, at that time, and our old mansion
was left unharmed and safe, till such time as its owners could return
to its peaceful shades.” “And did the Tory uncle never return to
America?” “He did not; he reached England in safety, but did not live
long after that event. I will relate one little circumstance, Charles,
which happened at this time. There was a poor widow, who occupied
a small house in Charlestown, which was destroyed during the
conflagration, and which comprised the whole of her fortune. She
had contrived to support herself and two children by her daily
exertions, but was now left destitute indeed. With the hope of
assistance from some friends, in an adjoining town, she took her
departure from the scene of destruction, carrying one child in her
arms, while the other, an active little boy of four years, closely
followed her footsteps. As he trudged along and employed the little
staff with which his mother had provided him, in tracing lines in the
road, he struck something which, by its brightness, attracted his
attention. Picking it up and delighted with his prize, he soon overtook
his mother and showed her a ring, the value of which was evident by
its costly diamond, and the initials and cypher upon the inside. The
good woman, rather perplexed than pleased with this circumstance,
and tired with her walk, sat down with her children upon some timber
to deliberate upon what she should do with her acquisition. Two
gentlemen, whose dress announced them to be British officers, were
walking slowly by, and as they passed, she heard one say, ‘It must
have been near this spot. It was a last memento, and the loss is to
me irreparable.” Thinking it possible this observation might refer to
the ring, she immediately addressed them, and related the
circumstance of her son’s finding it. It was directly identified, and
claimed by the officer, who had made the remark which had attracted
her attention. He had discovered his loss, and was then retracing his
steps, though almost hopeless of recovering his treasure. He was a
nobleman of high rank in the army, and, after a few words of inquiry,
she received not only present assistance, but assurance that her son
should never want a friend. The promise was faithfully fulfilled, and
through the assistance of their kind benefactor, he received an
education, which has enabled him to take a high stand in his
profession, which was that of a clergyman, and he is now a much
respected minister in this vicinity.”
Chapter XVI
’Midst the thorns are fragrant roses,

Sunbeams ’midst the shifting clouds.
Many days of open weather now intervened, when winter

appeared to meditate resigning his sovereignty. The snow
disappeared from the hills which surrounded their pleasant retreat,
little sunny nooks were visible where the early violet might shelter,
and the sands on the seashore were becoming bright and sparkling.
Delightful as were these indications of spring, the inmates of Mrs.
Wilson’s abode were not inclined to wish for its rapid approach. The
winter had not only been pleasantly, but they all felt, profitably, spent,
that seed had been sown which might, by careful culture, produce an
abundant harvest. The joyous and lively spirits of Susan still retained
all their buoyancy and she joined them on the sands where they
were watching the white sails of the vessels as they were leaving the
harbor, as the sun shone full upon them.
“They are leaving their homes,” said Elizabeth, “to cross that
ocean, which, though now so serene, we have seen under such
different aspects.” “And,” said Herbert, “they are, no doubt, elated
with the pleasant auspices under which they commence their
voyage. Sailors are a superstitious race; they dread to leave their
port under a lowering sky; and it is almost impossible to induce them
to embark on Friday. You will frequently see them on a land-cruise,
as they call it, to overhaul the log-book of the redoubtable Moll
Pitcher, or some old fortune teller, relative to the success of their
voyage, the constancy of their sweethearts, etc., and the wise old
lady prognosticates so much to their satisfaction that they return in
great glee, after leaving with her a goodly portion of their well-filled
purses.” “It is surely a kind Providence,” said Mary, “which hides from
us the events of futurity. How wretched would be every intervening
moment were we certain of the time of some great calamity!”
“True, Mary,” said Herbert, “and there are many who, without this
knowledge, suffer a thousand deaths in fearing one. I refer to those
who are ever anticipating evil, who prophesy destroying frost in
every cold wind and blight or blasting mildew in the warm sun or
refreshing rain.” “I am decidedly of the opinion,” said Susan, “that
such persons are worse in society than drones in a hive, for the idle
person generally injures himself more than any one else, but the
discontented one makes others wretched by imparting to them a
portion of his bitterness. It gives me the fidgets to hear poor Mrs.
Flagg complain of this wicked world, protesting that everybody is
governed by selfish motives and, shaking her head, declare that
there is no such thing as happiness on earth, and yet she enjoys, or
seems to enjoy, to perfection a good cup of tea and a warm cake.”
“We are too young, as yet, my cousin,” said Herbert, “and have
seen too few of the trials of life to controvert, positively, the good
woman’s assertion, but, when we look around us and see so much
beauty, so much to love and admire, we may be sure that our
Creator did not place us here to be miserable.”
“Now for a race, Charles,” said Susan; “I shall be at the gate first.”
They met Mrs. Wilson at the door and she greeted them with joyful
news; a letter had arrived from their parents. The health of their
father had so much improved that he wrote of speedy return and
rejoiced in the happiness so apparent in the letters of his children.
There was but one shadow to this pleasant news, the breaking up of
their winter enjoyments, but Herbert reminded them that at any rate
his vacation was nearly at an end; that they could look back upon
this Winter in Retirement with almost unalloyed pleasure and forward
with the cheering hope of future joyous meetings; also with the
certainty that, by the help of Providence, the treasures stored in their
minds through this, at first, dreaded season, would prove precious
and available in all the varying events of their lives. “We will improve
the time yet left us and I will read you this evening some lines written
by a lady born in this town.”
THE OLD HOME
Speed onward, Time! thy dark wings leave

Deep traces on the path they cleave!
Speed onward! for the goal is near,
Backward I mark thy swift career,
And through the hazy past mine eye
Dwells on the scenes of infancy;
For, bright and clear its visions seem,
And sweet, in Memory’s glowing dream,
The broad Atlantic’s waves are bright
Where first my eyes beheld the light;
The broad Atlantic’s shores are fair
Where first I breathed my native air;
They boast of clear Italian skies;
I’ve seen the glorious sun arise
From out his sparkling ocean-bed,
And, o’er my home, his splendors shed,
His beams illumined the swelling sails
That caught the scented morning gales;
Ne’er were Italian skies more fair
Than rested o’er my old Home there.
Thy rocky cliffs, Nahant, gleamed bright

As morning poured her golden light;
And silvery streams of whiteness broke
From the rough seams of old Egg Rock;
Inland arose, ’midst foliage gay,
The Lover’s Leap, with forehead grey;
With haughty front, High Rock would seek
To court the sun’s first rising beam,
And sheltered homes, and meadows rare,
Soon caught the glittering radiance there.
The early sunlight never shone
On brighter than my own old Home.
And romance spread her witching dream

O’er shore and wood and rippling stream,
For here, ’twas said, the pirate Kidd
His ill-got store of treasure hid;
Amidst a wild and craggy waste,
Where straggling pines their shadows cast,
A rocky Cavern, dark and deep,
Stretched inward from its opening steep;
And there, ’twas told, foul deeds were wrought
And gold concealed, by murder bought,
Till, at the Dungeon’s gloomy name
The blood in quicker currents came.
Weird Superstition spread her wing

Of sombre shade, o’er dell and spring;
Once, powers of ill seemed leagued, to bind
In clouds of mist, the human mind;
Dread scenes ensued, and but the name
Of Witchcraft roused the smouldering flame,
The whirlwind spent its mightiest force
On Salem’s heights, but in its course
Its withering breath defiled the scene
Which else would more like Eden seem,
The haze of long past years alone
Casts shadows o’er my own old Home.
We boast, too, of a Sybil’s fame,
Though graced with but a homely name,
But never Sybil had more power,
And Sybil ne’er more honors bore;
No horrid rites she tried to show
A prophet’s skill, no charms to know,
No Sybil of old Rome was she
To give the Books of Destiny;
She knew no Book; but could enthrall
With magic skill the minds of all,
And some may live who once have known
The Sybil of my own old Home.
Here patriot hearts and patriot hands

Were joined to break Oppression’s bands;
Our pleasant homes sent forth their best
To fight, at Freedom’s high behest;
We claim the Puritan’s high birth;
Our fathers left their native hearth,
Their sons on Freedom’s land to rear,
Who, tyrant despots need not fear;
Where they might truly worship God
Without a Bishop’s mitred rod;
And tyrant power has ne’er been known
To hover round my own old Home.
Speed onward, Time! while life remains

And Memory her power retains,
My own old Home! I’ll cherish thee
Amidst the dreams of infancy;
The mists of age may gather round;
The silver cord may be unbound;
Speed onward, Time! for death alone
Can dim the thought of my old Home.
“Though the local scenery of Lynn,” said Mrs. Wilson, “is not
essentially changed since this was written, many of its manners and
customs are. The good old Puritan days have somewhat gone by;
but it is pleasant to read something which refers to the time when
they were reverenced and appreciated.”
Chapter XVII
Peaceful and calm as Sabbath’s holy eve.
On the ensuing Sabbath evening the conversation turned upon the

public services of the day, which were rendered interesting to
Charles, as well as the others, by their reference to the ancient
history of Palestine. “There is now left,” said Herbert, “but the dust
and ruins of these celebrated countries of antiquity. Were it not for
these, even yet, splendid mementoes of the former greatness of
ancient Syria, we should be lost in wonder and credulity when we
contrast the history of its past grandeur with the accounts of modern
travelers. How puny do the works of our days of boasted superiority
appear, compared with the colossal ruins of Balbec and Palmyra,
where the stones of which their mighty edifices were composed
would seem to require the strength of giants, or such machinery as
the mechanism of these times can hardly imagine, to place them in
their appointed situation. The plains of Syria, from the earliest
records of time, have been the theatre on which the most interesting
scenes have been performed. Embattled legions have here fought to
the death, and the footsteps of the messengers of peace on earth,
preceded by those of their Divine Master, have pressed the favored
soil. Here, too, the wild fanaticism of the Crusades rose to its climax,
here the brave, but imprudent and improvident Richard of England,
and the generous, noble-hearted Saladin figured in their brief
careers. These scenes possess an indescribable charm for the
Christian, while they present inexhaustible themes for poetry and
romance.” “Your enthusiasm, dear Herbert,” said Elizabeth, “would
lead us to suppose that you, too, had taken them for a theme; do not
deny us the pleasure of profiting by the inspiration.” “I will not,” said
he, “though I have only attempted a paraphrase of an incident
related in the Scriptures.”
’Twas noon; on Syria’s sandy plains

The scorching sun pours down his beams:
Where shall the weary traveler rest?
Where shall he slake his burning thirst?
Far in the hazy distance seen,
Rises a grove of palm trees green,
And, to the near approach displays
To the enraptured wanderer’s gaze
A sweet retreat, whose verdure bright
And fountains cool and shaded light
Would seem to promise that no care
Or sorrowing heart could linger there.
Vain thought! for earth contains no spot
Where sin or sorrow enters not.
Mistaken dream! a heaven of bliss
Alone bestows a gift like this.
Amidst these shades a palace rose;
A proud and stately front it shows;
Around, ’tis graced with gardens fair,
Delightful perfumes fill the air;
Sweet music cheers the passing day,
Delicious waters cast their spray;
And, when the soft and gentle breeze
Of peaceful twilight stirs the trees,
The bird of night, with plaintive strains
Soothes to repose and pleasant dreams.
But in this spot, so calm and sweet,
There dwelt sad hearts and sorrows deep;
The Syrian Captain there abode,
Naaman, favorite of his lord;
Riches surround the mighty Chief;
Do they avert a dreaded grief?
Slaves bow before his slightest word,
And splendor decks his plenteous board;
Ah! sad relief for anxious care.
Ah! poor resort against despair.
With saddened brow the warrior stalks
Through stately halls and sheltered walks,
The leper’s curse is on him fixed;
With his best blood the plague is mixed,
And fleeting Time, he knows, full sure,
Will bring fresh misery to endure.
No hope for him; each rising morn
Still sees his heart with anguish torn,
While each returning hour for sleep
But marks his hour for torture deep.
Still, one there is to share his grief
If sympathy could bring relief;
Behind those latticed windows dwells
A form whose heart with sorrow swells;
The wife; whose best affections twine
Around his love; as twines the vine
Round some supporting prop or power
That shields it in the dangerous hour.
Oh! not for them the trusting prayer,
That sure resource against despair;
Thine idol gods are powerless now,
In vain to them, the knee they bow.
But, as the pious man of old
Obtained, by intercession bold,
A promise, that, if ten were found
Within the fated city’s bound,
Who worshiped God with zeal and truth,
They should avert the dreaded wrath.
So, now, the faith of one restored
To health and strength the Syrian Lord,
Amidst the slaves, a Hebrew maid,
Obedience to her mistress paid,
And, sympathizing with her woe,
Sought means to save the dreaded blow;
A holy prophet dwelt, she told,
Where rose Samaria’s turrets bold;
That God, to him, had given the power
This fatal leprosy to cure.
Beneath an Olive’s spreading shade,

The holy prophet knelt and prayed;
The leper, with his pompous train,
Assistance asks, nor asks in vain;
“Go wash in Jordan’s sacred stream,”
The prophet said, “Wash and be clean.”
With proud disdain, the Syrian turned;
Such simple means his nature spurned;
Some mighty deed, he proudly thought.
Was needful, when his cure was wrought,
“Are not our Syrian streams,” he said,
“Better than Jordan’s vaunted tide?
“Is not Arbana’s silver wave,
“Or Pharphar’s flood, fit place to lave?”
But, yielding to affection’s prayer
The haughty leper sought the shore;
Where Jordan’s swelling waters flowed,
And bathed him in the healing flood;
Then, rising from the holy stream,
No loathsome leprosy is seen;
No tainted blood his system knows,
But, pure the healthful current flows;
No sickly scales his flesh deform,
Like the fair child’s, now soft and warm,
With joyful heart, and thankful praise
To Israel’s God, he lifts his eyes;
“There is no God, but Israel’s God;”
The wondering train repeat the word.
’Twas eve; on Syria’s sandy plains

The scorching sun no longer beams;
Athwart the weary traveler’s brow
The chilling night-wind passes now;
The prowling thief, with murderous steel
Each sandy hillock may conceal;
Where shall the wanderer find repose?
How shall he ’scape his secret foes?
On; pilgrim, on; yon glimmering light
That, through the distance, greets thy sight,
Is the bright beacon-ray to guide
Thy toiling footsteps to its side;
Not now does sorrow’s gloomy cloud
That lovely spot in darkness shroud;
No rites, unholy, now are there;
No tainted incense fills the air;
On; pilgrim, on; for Israel’s God
Is worshiped there, by Syria’s lord;
And the rich mercies he receives
With bounteous hand he freely gives.
And now that our “Winter in Retirement” has drawn to a close, let
us hope that the lesson we have tried to inculcate, that a life of
excitement, and scenes of continued gayety are not necessary for
the happiness of the young, may not be unheeded by those for
whose benefit it is written. Life is too precious, too priceless a gift
from our Father in heaven for part of its hours to be spent in trifling
amusements, part in resting after their fatigue, and part in sad
reflections upon their inutility. May this little volume, through His
blessing, carry an antidote for these evils, and lead our youth to try
its efficacy.
Autumn drew near; and, with her magic brush

Had touched the landscape; on the mountain’s slope,
Bright tints were mingling with the evergreens
Crowning its heights; and, as the freshening breeze
Swept onward, in its joyous course it bore
The many colored leaves, the forest’s pride,
Some few were green, and to the thoughtful mind
Recalled the youthful spring, in verdure rich;
Others appeared, touched with bright summer’s ray,
And mingled with the glowing heaps, bring back,
The sunny days of bright July; but more
Displayed deep crimson hues, or, orange, gay,
Or golden yellow; or, perchance, laid clothed
In sombre garb—
I sought, long time,
A title for my Book; Leaves there are here
Of Thought and Memory; some fresh like youth,
And many tinged with Autumn’s varying shades;
While, over all, a brightening light is cast,
The light of Hope.
Transcriber’s Notes
pg 8 Changed: procurring the contents of his basket
to: procuring the contents of his basket
pg 11 Changed: And the triumphalt Arch
to: And the triumphal Arch
pg 13 Changed: Who can this women be
to: Who can this woman be
pg 20 Changed: these obtinate Christians in view
to: these obstinate Christians in view
pg 21 Changed: and pursuaded her to hear the preaching
to: and persuaded her to hear the preaching
pg 22 Changed: under that, shelter our pulsillanimity
to: under that, shelter our pusillanimity
pg 22 Changed: request of Servius Sulspicus Galba
to: request of Servius Sulpicius Galba
pg 44 Changed: infered that learning was not necessary
to: inferred that learning was not necessary
pg 51 Changed: Rise, dear to memory’e eye
to: Rise, dear to memory’s eye
pg 57 Changed: so reverened and beloved
to: so revered and beloved
pg 59 Changed: trobbing with hope and visions
to: throbbing with hope and visions
pg 61 Changed: silmultaneous burst of triumph around
to: simultaneous burst of triumph around
pg 61 Changed: and the terrible ery of “death”
to: and the terrible cry of “death”
pg 62 Changed: alotted so long a term of life
to: allotted so long a term of life
pg 63 Changed: with speed unparalelled
to: with speed unparalleled
pg 64 Changed: the lofty Appenines still bound
to: the lofty Apennines still bound
pg 73 Changed: He is not destitue of partisans
to: He is not destitute of partisans
pg 75 Changed: rushed upon its point, anad closed
to: rushed upon its point, and closed
pg 75 Changed: in rapid emotion, for the city
to: in rapid motion, for the city
pg 77 Changed: no place for their inuendoes
to: no place for their innuendos
pg 81 Changed: Sagana, the Thessaiian
to: Sagana, the Thessalian
pg 81 Changed: implores a resing place
to: implores a resting place
pg 82 Changed: whose transcendant beauty
to: whose transcendent beauty
pg 94 Changed: took an affecionate interest
to: took an affectionate interest
*** END OF THE PROJECT GUTENBERG EBOOK A WINTER IN
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Auditing and Assurance Services 16th Edition Arens Test

2. Obtaining an understanding of the internal control and assessing control risk:

3. Tests of controls are performed to determine whether or not:

4. The conclusion reached as a result of assessing control risk is referred to as the:

5. An auditor assesses the level of control risk to:

10. A primary purpose of internal controls is to:

30. An effective internal control requires organisational independence of departments. Organisational

The most logical sequence of steps is:

51. A limit test is a:

A. The controls appear adequate.

69. An input control is designed to ensure that:

A. at the beginning of a valid account number, only.

A. eliminate tests of controls.

2. Obtaining an understanding of the internal control and assessing control risk:

3. Tests of controls are performed to determine whether or not:

5. An auditor assesses the level of control risk to:

10. A primary purpose of internal controls is to:

Chapter - Chapter 08 #10

Chapter - Chapter 08 #11

Chapter - Chapter 08 #12

Chapter - Chapter 08 #13

Chapter - Chapter 08 #14

Chapter - Chapter 08 #15

16. Which of the following statements about internal control is correct?

Chapter - Chapter 08 #16

Chapter - Chapter 08 #17

Chapter - Chapter 08 #18

Chapter - Chapter 08 #19

Chapter - Chapter 08 #20

Chapter - Chapter 08 #21

Chapter - Chapter 08 #22

Chapter - Chapter 08 #23

Chapter - Chapter 08 #24

Chapter - Chapter 08 #25

Chapter - Chapter 08 #26

Chapter - Chapter 08 #27

Chapter - Chapter 08 #28

Chapter - Chapter 08 #29

Chapter - Chapter 08 #30

Chapter - Chapter 08 #31

32. A flowchart is most frequently used by an auditor in connection with the:

Chapter - Chapter 08 #32

Chapter - Chapter 08 #33

Chapter - Chapter 08 #34

Chapter - Chapter 08 #35

Chapter - Chapter 08 #36

Chapter - Chapter 08 #37

Chapter - Chapter 08 #38

Chapter - Chapter 08 #39