Statement 1: As part of obtaining an understanding of internal control, an auditor is required to obtain knowledge about the operating effectiveness of internal control. Statement 2: The auditor obtains an understanding of internal controls to identify the types of potential misstatements that may occur. Group of answer choices A. False, true B. True, false C. False, false D. True, true

Statement 1: As part of obtaining an understanding of internal control, an auditor is required to obtain knowledge about the operating effectiveness of internal control. Statement 2: The auditor obtains an understanding of internal controls to identify the types of potential misstatements that may occur. Group of answer choices A. False, true B. True, false C. False, false D. True, true

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter3: Internal Control Over Financial Reporting: Responsibilities Of Management And The External Auditor

Section: Chapter Questions

Problem 40CYBK

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Question 1 To what does the following relate: The Internal Auditors perform random testing on controls to ensure that they are operating effectively 1. Control activities – access controls 2. Monitoring of controls 3. Inherent limitations – cost vs benefit 4. Inherent limitations – human error, time constraints Question 2 The following is not one of the five components of internal control. 1. Control Environment 2. Entity’s risk assessment process 3. Information system 4. Segregation of duties Question 3 To what does the following relate: All invoices are pre-printed, sequentially numbered, and pre-numbered 1. Control activities – documentation and records 2. Validity of transactions 3. Monitoring of controls 4. Inherent limitations-human error, time constraints Question 4 To what does the following relate: Before a purchase of inventory can be made, it has to be…
1C Explain what lapping means, and discuss the internal control deficiency that allows it to occur. Also discuss the procedures the auditor can perform to detect lapping.
tch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.
Which of the following does not accurately summarize auditors’ requirements regarding internal control?
Determine whether statement and statement 2 is true or false 3. S1-It is necessary for the audit team members to have a collective knowledge needed to carry out the engagement S2 - An important responsibility of an auditor is the establishment and maintenance of internal control on an ongoing basis a. False, False b. True, False c. False, True d. True, True 4. S1 - Generally, the more reliable internal controls are, the lesser the substantive test procedures the auditor would need to perform in auditing year-end account balances S2 - The industry in which the client operates may give rise to specific risks of material misstatements arising from the nature of the business or the degree of regulation a. False, False b. True, False c. False, True d. True, True 5. S1 -Objectives are the overall plans for the entity, while strategies are the operational approaches by which managements intends to achieve its objectives S2- Not all controls are relevant to the auditor’s risk assessment a.…
An auditor assesses control risk because it: A. is relevant to the auditor's understanding of the control environment B. provides assurance that the auditor's materiality levels are appropriate. C. indicates to xthe auditor where inherent risk may be the greatest. D. affects the level of detection risk that the auditor may accept.
3. An auditor can receive one of three types of report from a Service Organizations when providing Assurance or Auditing services for a client. A Type 2 or SOC 2 service auditor's report addresses: Group of answer choices Only management's description and design of its controls. Management's description and design of its controls and control operating effectiveness. Only control operating effectiveness. Control operating effectiveness and primary assertion reliability.
A related party transaction is a transfer of resources, services, or obligations between related parties when no consideration is involved. The auditor assesses control risk as high or at the maximum level when the internal controls of the client have not been effectively designed or have not operated effectively. Group of answer choices False, False True, False True, True False, True
Risk assessment procedures include audit evidence such as inquiries, inspection and observation, and confirmation. The auditor’s assessment of control risk of the client could affect the extent of the auditor’s evidence gathering procedures. Group of answer choices True, True True, False False, True False, False
Which of the following is correct? a. Auditors should evaluate application controls before evaluating general controls b. Auditors should evaluate application controls and general controls simultaneously. c. Auditors should evaluate general controls before evaluating application controls. d. None of these statements is correct. Required: choose the correct answer and Justify your answers in at least 6 sentences.
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 Only S1 is correct. Both S1 and S2 are incorrect. Both S1 and S2 are correct. Only S2 is correct.
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