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

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

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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Which of the following does not accurately summarize auditors’ requirements regardinginternal control?LO 5-5LO 5-5Management’s Report onInternal ControlAn Audit ofInternal Controla. No Nob. Yes Noc. No Yesd. Yes YesPublic Entity Nonpublic Entitya. Understanding Yes Yesb. Documenting Yes Yesc. Evaluating control risk Yes Yesd. Test controls Yes Yes
Regarding materiality, both amount and nature of misstatements should be considered. One of the inherent limitations of internal control is the lack of segregation of duties. Group of answer choices False, False True, True True, False False, True
Which of the following is NOT a potential expo- sure of the FRS? a. a defective audit trail b. general ledger accounts that are out of balance with subsidiary accounts c. unauthorized access to the check register d. unauthorized access to the general ledger
When completing the audit of internal controls for an issuer, the severity of an internal control deficiency depends ona. Whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstatement of an account balance or disclosure.b. Whether a misstatement has actually occurred as a result of the deficiency.c. The magnitude of the potential misstatement resulting from the deficiency or the deficiencies.d. Both a and c are correct.e. All of the above are correct.
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
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
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.
Which of the following is not a principle relating to risk assessment? a. Identifies and analyses risks and respond to changes b. Designing the information systems c. Specifies objectives with sufficient clarity d. Considers the potential for fraud in assessing risks
Performance auditing is oriented primarily toward Past protection provided by existing external control Past protection provided by existing internal control Adding credibility and reliability to the financial statements None of the above
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.
In a non public audit (AICPA), auditors might chose to not test controls if Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Design of control is weak/deficient, Controls Risk is High, or High cost of testing I/C b Design of control is strong/effective, Control Risk is low or low cost of testing
The difference between assessing control risk for IT control activities versus assessing control risk for manual control activities is best described as follows: Multiple Choice О in a manual environment it is important for the auditor to gain an understanding of the internal control activity before assessing control risk. О in an IT environment, it is not important to gain an understanding of the internal control activity before assessing control risk. О In an IT environment, it is likely that control risk will be assessed as low on largely all audit engagements. О the assessment process that needs to be undertaken for IT controls is essentially the same as would be taken for manual controls.