Question 1

All internal control systems are subject to inherent limitations.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following requires managements of pubic companies to assess the adequacy of internal controls over financial reporting and further requires their auditors to audit management's assessment of internal controls over financial reporting and the actual effectiveness of the system of internal controls?

Accepted Answer

A)   Foreign Corrupt Practices Act
B)   Securities Exchange Act of 1934
C)   SAS 55, Consideration of the Internal Control Structure in a Financial Statement Audit
D)   Section 404 of Sarbanes-Oxley
E)   PCAOB Standard No. 9F) B) and E)
G) B) and C)

Question 3

A report that summarizes gross margin by region is an example of a procedure review.

Accepted Answer

A) True 
 B)False

Question 4

General authorization relates to the granting of the authorization on a case by case basis.

Accepted Answer

A) True 
 B)False

Question 5

Organization and operation controls address risks related to the authorization, completeness, and accuracy of transactions.

Accepted Answer

A) True 
 B)False

Question 6

Parity check involves transmitting data received by an output device back to the source unit for comparison with the original data.

Accepted Answer

A) True 
 B)False

Question 7

The Foreign Corrupt Practices Act is administered by the Federal Trade Commission.

Accepted Answer

A) True 
 B)False

Question 8

To minimize the risks associated with on-line entry/batch processing, some companies use memo updating of the master file at the time of data entry.

Accepted Answer

A) True 
 B)False  False

Question 9

Management's risk assessment should include the following special consideration of the risks that can arise from changed circumstances except:

Accepted Answer

A)   new personnel.
B)   rapid growth.
C)   new technology.
D)   corporate restructurings.
E)   domestic operations.F) None of the above
G) A) and E)

Question 10

The COSO report concludes that a few key people in an organization has some responsibility the organization's internal controls.

Accepted Answer

A) True 
 B)False

Question 11

Match between columns
                        Premises: Performance reviews
Commitment to competence
System should provide a complete audit or transaction trail
Integrity and ethical values
Access controls
Changes in operating environment
Board of directors and audit committee
Segregation of duties
Organizational structure
Reporting exceptions for follow-up
Management’s philosophy and operating style
Internal audit function
Physical controls
New accounting pronouncements
Assignment of authority and responsibility
Human resource policies and procedures
Organization and operation control
Input controls
Data and procedural controls
Processing controls

Accepted Answer

The Answer of control environment and risk assessment and information is...

Question 12

Computer general controls represent a lower level of controls.

Accepted Answer

A) True 
 B)False

Question 13

What procedures are normally used by the auditor to obtain an understanding of internal controls?

Accepted Answer

The auditor normally obtains an understanding of the internal control structure by:
1.reviewing previous experience with the client
2.inquiring of appropriate management, supervisory, and staff personnel
3.inspecting documents and records
4.observing entity activities and operations
5.tracing transactions through the information and communication system

Question 14

A major focus of the accounting system is on transactions.

Accepted Answer

A) True 
 B)False

Question 15

In the example system of cash receipts, the cashier prepares the bank deposit slip and makes the daily bank deposit.

Accepted Answer

A) True 
 B)False

Question 16

Some auditors associate controls related to recording transactions in the correct accounting period with a separate objective identified as the extension objective.

Accepted Answer

A) True 
 B)False

Question 17

1.What is the purpose of general controls?
2.Why are general controls important to the auditor?
3.What is the purpose of application controls?

Accepted Answer

1.The purpose of general controls

Question 18

The organizational structure of a company is usually depicted graphically in an organization chart.

Accepted Answer

A) True 
 B)False

Question 19

From a control standpoint, which one of the following is a benefit of IT systems over manual systems?

Accepted Answer

A)   information in machine-sensible form only
B)   decrease in human involvement
C)   reduction in documentation
D)   consistency in processing
E)   a more distinct transaction trailF) B) and D)
G) None of the above D

Question 20

Legislators and regulators establish minimum statutory and regulatory requirements for the establishment of internal controls by certain entities.

Accepted Answer

A) True 
 B)False

Exam 10: Understanding Internal Controls

All internal control systems are subject to inherent limitations.

Correct Answer
verified

Correct Answer
verified

A report that summarizes gross margin by region is an example of a procedure review.

Correct Answer
verified

General authorization relates to the granting of the authorization on a case by case basis.

Correct Answer
verified

Organization and operation controls address risks related to the authorization, completeness, and accuracy of transactions.

Correct Answer
verified

Parity check involves transmitting data received by an output device back to the source unit for comparison with the original data.

Correct Answer
verified

The Foreign Corrupt Practices Act is administered by the Federal Trade Commission.

Correct Answer
verified

To minimize the risks associated with on-line entry/batch processing, some companies use memo updating of the master file at the time of data entry.

Correct Answer
verified
False

Management's risk assessment should include the following special consideration of the risks that can arise from changed circumstances except:

Correct Answer
verified

The COSO report concludes that a few key people in an organization has some responsibility the organization's internal controls.

Correct Answer
verified

An entity's internal controls consist of five interrelated components (plus an overriding concern with fraud prevention and detection), identify the component to which each of the following control activities or considerations pertains.

Computer general controls represent a lower level of controls.

Correct Answer
verified

What procedures are normally used by the auditor to obtain an understanding of internal controls?

A major focus of the accounting system is on transactions.

Correct Answer
verified

In the example system of cash receipts, the cashier prepares the bank deposit slip and makes the daily bank deposit.

Correct Answer
verified

Some auditors associate controls related to recording transactions in the correct accounting period with a separate objective identified as the extension objective.

Correct Answer
verified

1.What is the purpose of general controls? 2.Why are general controls important to the auditor? 3.What is the purpose of application controls?

Correct Answer
verified
1.The purpose of general controls
View Answer

The organizational structure of a company is usually depicted graphically in an organization chart.

Correct Answer
verified

From a control standpoint, which one of the following is a benefit of IT systems over manual systems?

Correct Answer
verified
D

Legislators and regulators establish minimum statutory and regulatory requirements for the establishment of internal controls by certain entities.

Correct Answer
verified

Exam 10: Understanding Internal Controls

All internal control systems are subject to inherent limitations.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A report that summarizes gross margin by region is an example of a procedure review.

Correct AnswerverifiedShow Answer

General authorization relates to the granting of the authorization on a case by case basis.

Correct AnswerverifiedShow Answer

Organization and operation controls address risks related to the authorization, completeness, and accuracy of transactions.

Correct AnswerverifiedShow Answer

Parity check involves transmitting data received by an output device back to the source unit for comparison with the original data.

Correct AnswerverifiedShow Answer

The Foreign Corrupt Practices Act is administered by the Federal Trade Commission.

Correct AnswerverifiedShow Answer

To minimize the risks associated with on-line entry/batch processing, some companies use memo updating of the master file at the time of data entry.

Correct AnswerverifiedFalse

Management's risk assessment should include the following special consideration of the risks that can arise from changed circumstances except:

Correct AnswerverifiedShow Answer

The COSO report concludes that a few key people in an organization has some responsibility the organization's internal controls.

Correct AnswerverifiedShow Answer

An entity's internal controls consist of five interrelated components (plus an overriding concern with fraud prevention and detection), identify the component to which each of the following control activities or considerations pertains.

Computer general controls represent a lower level of controls.

Correct AnswerverifiedShow Answer

What procedures are normally used by the auditor to obtain an understanding of internal controls?

A major focus of the accounting system is on transactions.

Correct AnswerverifiedShow Answer

In the example system of cash receipts, the cashier prepares the bank deposit slip and makes the daily bank deposit.

Correct AnswerverifiedShow Answer

Some auditors associate controls related to recording transactions in the correct accounting period with a separate objective identified as the extension objective.

Correct AnswerverifiedShow Answer

1.What is the purpose of general controls? 2.Why are general controls important to the auditor? 3.What is the purpose of application controls?

Correct Answerverified1.The purpose of general controls View AnswerShow Answer

The organizational structure of a company is usually depicted graphically in an organization chart.

Correct AnswerverifiedShow Answer

From a control standpoint, which one of the following is a benefit of IT systems over manual systems?

Correct AnswerverifiedD

Legislators and regulators establish minimum statutory and regulatory requirements for the establishment of internal controls by certain entities.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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1.The purpose of general controls
View Answer

Correct Answer
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Correct Answer
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D

Correct Answer
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