S1: Smaller companies tend to maintain less formal means and simpler processes and procedures in their internal control activities. S2: The determination of the specific procedures in audit will ultimately depend on the auditor’s professional judgment. Group of answer choices Both S1 and S2 are incorrect. Only S2 is correct. Only S1 is correct. Both S1 and S2 are correct.

S1: Smaller companies tend to maintain less formal means and simpler processes and procedures in their internal control activities. S2: The determination of the specific procedures in audit will ultimately depend on the auditor’s professional judgment. Group of answer choices Both S1 and S2 are incorrect. Only S2 is correct. Only S1 is correct. Both S1 and S2 are correct.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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34. Which of the following statements regarding types of operational audits is false? Group of answer choices Special operational auditing assignments arise at the request of management The emphasis in an organizational audit is on how efficiently and effectively functions interact A functional audit has the advantage of permitting specialization by auditors An advantage of functional auditing is its ability to evaluate interrelated functions
1. S1: The concept of materiality would be very important to an auditor in determining transactions that should be validated. S2: The level of assurance expected to be issued affects the amount of procedures to be performed by the practitioner. Group of answer choices Both S1 and S2 are incorrect. Only S2 is correct. Both S1 and S2 are correct. Only S1 is correct. 2. S1: Analytical procedures used as substantive test focuses on detecting material misstatements. S2: The responsible party always prepare a representation that will be subjected to the validation of the practitioner. Group of answer choices Only S1 is correct. Both S1 and S2 are incorrect. Both S1 and S2 are correct. Only S2 is correct. 3. S1: After conducting an audit and release of the audit report, the primary responsibility on the fairness of the financial statements remains with the management and those charged with governance of the entity. S2: In recurring audits, the auditor may not send a new…
3.Residual risks are not: Group of answer choices Unaddressed risks Unmanaged risks Mitigated risks None of the choices Net risks 4. Recommendations should be included in final audit communications to: Group of answer choices Ensure that problems are resolved in the manner suggested by the auditor Provide management with options for addressing audit observations Minimize the amount of time required to correct audit observations Guarantee that audit observations are addressed, regardless of cost
1. The use of computer systems in financial reporting increases the risk of material misstatements. true or false 2. Automated controls in a computerized system are always more reliable than manual controls. true or false 3. Which of the following is NOT a requirement for an auditor to maintain independence? a. The auditor must not be related to any employees of the company being audited b. The auditor must not have any financial interest in the company being audited c. The auditor must not have any business relationships with the company being audited d. The auditor must have a significant financial stake in the company being audited 4. Which of the following is NOT a type of computer system control? a.Input controls b.Processing controls c.Output controls d.Feedback controls
Critical audit matters are most likely to include those matters that: Multiple Choice Are communicated to the Public Company Accounting Oversight Board. Involve challenging, subjective or complex auditor Judgment. Are material weaknesses in internal control. Involve significant risks.
17. Which of the following statements is/are correct? Statement I. Internal auditors should have the authority to require implementation of suggestions for improvement. Statement II. One disadvantage of functional auditing is the failure to evaluate interrelated functions. Group of answer choices Statement II only None of the statements Statement I only Statements I and II
Why do we consider risk assessment the foundation of the internal audit function? To safeguard independence, many internal audit departments continue to perform risk assessments in a silo, without collaborating with and leveraging the work of ERM. Do you agree with this approach?
Which of the following is not true concerning materiality? a. Materiality is a matter of professional judgement O b. Materiality is used as a guide to planning substantive procedures O c. Materiality is used a guide for making decisions about the audit report d. All of the Above are True Statements e. None of the Above are True Statements
The requirement for an attitude of scepticism means that the auditor should A) perform additional tests of controls to increase the probability of discovering fraud or errors. B) plan and conduct the audit with an attitude of distrust in management. C) not be blind to evidence that suggests the documents, books, or records have been altered or are incorrect. D) not consider management's explanation as evidence on any subject
5.Which of the following is not the function of audit committee?Single choice. (1 Point) To make recommendations about auditor's fee To advice the removal of the external auditors To look after the internal control in company All of above
TRUE OR FALSE1. WHEN OBTAINING AN UNDERSTANDING OF CONTROL ACTIVITIES OF A RELATIVELY SMALL CLIENT, THE AUDITOR IDENTIFIED NO CONTROL ACTIVITIES, THE AUDITOR WOULD PROBABLY SET A HIGH ASSESSMENT OF CONTROL RISK2. WHEN A COMPANY DESIGNS AND IMPLEMENTS INTERNAL CONTROLS, COST OF THE CONTROLS IS NOT A VALID CONSIDERATION.3. AUDITING STANDARDS PROHIBIT RELIANCE ON THE WORK OF INTERNAL AUDITORS DUE TO THE LACK OF INDEPENDENCE OF THE INTERNAL AUDITORS
15. Which of the following statements is true about operational auditing? Group of answer choices Operational audits may also be concerned with the hierarchy of the organization since a poorly structured organization, or one where Information does not flow accurately and promptly jeopardizes efforts to achieve objectives None of the choices The purpose of operational auditing is to improve organizational stature and the attainment of departmental objectives. An important aspect of operational auditing is that rather than merely verifying that employees are performing their duties according to established policies and procedures, internal auditors also verify a variety of quantitative aspects of the organization and its activities. Operational auditing involves evaluating management's performance since they have a fiduciary responsibility toward the organization's owners and other relevant stakeholders.