GEN COMBO LL PRINCIPLES OF AUDITING & OTHER ASSURANCE SERVICES; CONNECT AC
21st Edition
ISBN: 9781260427202
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Question
Chapter 7, Problem 35KOQ
To determine
Identify the appropriate answer related to the documenting of the understanding of the internal control.
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Which among the following is not a principle relating to control activities?
a.
Management designs control activities to achieve its objectives.
b.
Management designs its information systems and related control activities to achieve its objectives and respond to risks.
c.
External auditor implements the control activities to achieve its objectives and respond to risks
d.
The agency implements control activities through policies and procedures.
Identify how each of the following statements relates to the performance principle by considering which element(s) of the principle are
related to that statement. (A statement may be related to more than one element.) Use the following elements in providing your
response:
Reasonable assurance
• Planning and supervision
• Materiality
⚫ Risk assessment
• Audit evidence
a. Evaluating the effectiveness of the client's internal control in preventing or detecting misstatements.
b. Obtaining an understanding of the client's business and industry.
c. Acknowledging that the risk of failing to detect a material misstatement cannot be reduced to zero.
d. Obtaining confirmations from the client's customers as to the ending balances in accounts receivable.
e. Preparing a written audit plan.
f.
Designing audit procedures to identify misstatements that would have a significant effect on financial
statement users' decisions.
g. Considering the likelihood that the account balance contains a material…
After obtaining an understanding of the client's internal control, the auditor should consider whether
A. the evidential matter obtained from the study of the internal control system can provide a reasonable basis for an opinion.
B. the projected degree of effectiveness of internal control is justified.
C. further testing of internal control procedures is likely to permit further reduction in the assessed level of control risk.
D. sufficient knowledge has been obtained about the entity's entire system of internal control.
Chapter 7 Solutions
GEN COMBO LL PRINCIPLES OF AUDITING & OTHER ASSURANCE SERVICES; CONNECT AC
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Identify the four types of control activities and...Ch. 7 - One basic concept of internal control is that no...Ch. 7 - Prob. 10RQ
Ch. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - Prob. 14RQCh. 7 - Prob. 15RQCh. 7 - Prob. 16RQCh. 7 - Prob. 17RQCh. 7 - Prob. 18RQCh. 7 - Prob. 19RQCh. 7 - Prob. 20RQCh. 7 - Prob. 21RQCh. 7 - Prob. 22RQCh. 7 - Prob. 23RQCh. 7 - Management is responsible for designing and...Ch. 7 - Prob. 25QRACh. 7 - Prob. 26QRACh. 7 - Prob. 27QRACh. 7 - Prob. 28QRACh. 7 - Prob. 29QRACh. 7 - Prob. 30QRACh. 7 - Prob. 31QRACh. 7 - During your first audit of a medium-size...Ch. 7 - Prob. 33QRACh. 7 - Prob. 34QRACh. 7 - Which of the following would be least likely to be...Ch. 7 - Prob. 35BOQCh. 7 - Prob. 35COQCh. 7 - Prob. 35DOQCh. 7 - Prob. 35EOQCh. 7 - Prob. 35FOQCh. 7 - Prob. 35GOQCh. 7 - Prob. 35HOQCh. 7 - Which of the following is not an advantage of...Ch. 7 - Prob. 35JOQCh. 7 - Prob. 35KOQCh. 7 - Prob. 35LOQCh. 7 - Prob. 36OQCh. 7 - Listed below are controls that have been developed...Ch. 7 - Prob. 38OQCh. 7 - For each term in the first column, find the...Ch. 7 - Prob. 40AOQCh. 7 - Prob. 40BOQCh. 7 - Prob. 40COQCh. 7 - Prob. 40DOQCh. 7 - Prob. 40EOQCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45ITC
Knowledge Booster
Similar questions
- 1. What are objectives? What three categories of objectives are set forth in the COSO framework? 2. What does the control environment comprise? 3. What are control activities? What types of control activities are present in a well-designed system of internal controls? 4. When are monitoring activities most effective? Who performs monitoring activities? What distinguishes separate evaluations from ongoing monitoring activities? 5. How does internal auditors' perspective of internal control differ from management's perspective? 6. How does COSO define risk? How does ISO define risk? 7. What are the five COSO ERM components? 8. How does COSO define risk appetite? 9. What are some ERM assurance activities the internal audit function may perform? What are some ERM consulting activities the internal audit function may perform if appropriate safeguards are implemented? What ERM activities should the internal audit function not perform? 10. What are COSO's five categories of risk…arrow_forwardWhich of the following statements best describes the phrase, “evaluating the design of a control”? Group of answer choices A. Considering whether the control, individually or in combination with other controls, is capable of effectively preventing, or detecting and correcting, material misstatements. B. Expressing an opinion as to the effectiveness of a control. C. Observing the application of specific controls. D. Determining whether the control exists and that the entity is using it.arrow_forwardWhich of the following statements is correct concerning the understanding of internal control needed by auditors? The auditors must understand the information system, not the accounting system, The auditors must understand monitoring and all preliminary accounting controls, The auditors must have a sufficient understanding to access the risks of material misstatement, The auditors must understand the control environment, risk assessment, and all control activitiesarrow_forward
- An auditor is likely to use procedures to support the operating effectiveness of internal controls. Which of the following would generally not be used ? Select one : O a. Re -perform client procedures O b. Examine documents , records, and reports O c. Make inquiries of appropriate client personnel O d. Analytical proceduresarrow_forwardWhich one of the following is not included in the control environment? a. Integrity & Ethical values b. Organizational Structure c. Competence of Personnel d. External Auditorarrow_forward9. Procedures that can be used in obtaining a sufficient understanding of Internal Control include the combination of any of the following procedures, except; a. Inquiry of the profile and appropriateness of the client's personnel b. Future engagement plan with the client c. Review of the accounting manuals and organizational structure of the client d. Observation of the activities of the client e. Previous experience with the clientarrow_forward
- For a compliance engagement, three conditions must be met. Which of the following is notone of the three conditions?a. Management accepts responsibility for compliance.b. Management’s evaluation of compliance is capable of evaluation and is measured againstreasonable criteria.c. Sufficient evidence is available to support management’s evaluation.d. Management provides a report attesting to satisfactory compliancearrow_forwardWhich of the following is NOT a requirement in management’s report on the effectiveness of internal controls over financial reporting?a. A statement of management’s responsibility for establishing and maintaining adequate internal control user satisfaction. b. A statement that the organization’s internal auditors have issued an attestation report on management’s assessment of the company’s internal controls. c. A statement identifying the framework management uses to conduct its assessment of internal controls. d. An explicit written conclusion as to the effectiveness of internal control over financial reporting.arrow_forwardWhich of the following are true regarding internal auditors and the adequacy of an organization’s risk management process: I. Internal auditors must understand the risk assessment process and the tools used to make the assessment II. Internal auditors should determine the level of risks acceptable to the organization III. Internal auditors need to be satisfied that the key objectives of risk management processes are being met IV. Internal auditors should evaluate management’s risk processes the same way they analyze risk when planning an engagement Choices: a. I and III only b. I and II only c. None of the choices d. I, II, III and IV e. I, II and III onlyarrow_forward
- Internal control should be designed to provide reasonable assurance that a. Management’s planning, organizing, and directing processes are properly evaluated b. Management’s plans have not been circumvented by employee collusion c. Material errors or fraud will be prevented, or detected and corrected within a timely period by employees in the course of performing their assigned duties d. The internal auditing department’s guidance and oversight of management’s performance is accomplished economically and efficientlyarrow_forwardIs an organization’s internal audit function part of its system of internal controls? If your answer is yes, explain how the internal audit function can evaluate the design adequacy and operating effectiveness of internal controls and at the same time remain independent of the organization’s system of internal controls. If your answer is no, explain the internal audit function’s role relative to the organization’s system of internal controls.arrow_forwardWhen considering internal control, an auditor must be aware of the concept ofreasonable assurance, which recognizes that the(1) employment of competent personnel provides assurance that management’scontrol objectives will be achieved.(2) establishment and maintenance of internal control is an important responsibilityof management and not of the auditor.(3) cost of internal control should not exceed the benefits expected to be derivedtherefrom.(4) separation of incompatible functions is necessary to ascertain that the internalcontrol is effectivearrow_forward
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