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Auditing Chapter 3 Homework
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Questions in this quiz (31)
1What is the primary benefit of effective internal control in an organization?
- ACompleting a successful audit for the entity.
- BAchieving certain organizational goals.
- CObtaining profitability and financial strength.
- DMaximizing value for shareholders.
2Internal control is a process designed to achieve objectives in which one of the following categories?
- AReliability of financial reporting
- BCompliance with applicable laws
- COperational effectiveness
- DAll of the above
3Which of the following is considered to be an entity-wide control?
- ASegregation of duties
- BControls over management override
- CAdequately documented transaction trails
- DAuthorization procedures for purchasing
4Which of the following is not included as a component of an organization's internal control structure in the COSO framework?
- AControl activities
- BThe control environment
- CControl risk
- DRisk assessment
5Which of the following is considered to be a transaction control?
- AControls to monitor other controls
- BPhysical controls to safeguard assets
- CCentralized processing controls
- DPolicies that address significant business control practices
6Which of the following is not part of the control environment of an organization?
- AManagement’s philosophy and operating style.
- BOrganizational structure.
- COrganization’s commitment to ethical values.
- DAll of the above are part of the control environment.
7With whom does the tone of internal control typically originate?
- AAuditors
- BEmployees
- CStockholders
- DManagement
8Which of the following COSO components is the foundation for all other components of internal control?
- AInformation and communication
- BControl risk assessment
- CControl environment
- DMonitoring
9Which of the following is an example of a control environment deficiency?
- AA low level of control consciousness within the organization
- BAn audit committee that does not have independent members
- CAn audit committee that is not viewed as the client of the external auditor
- DAll of the above
10Which of the following is an example of a control environment deficiency?
- AA low level of control consciousness within the organization.
- BAn audit committee that does not have independent members.
- CAn audit committee that is not viewed as the client of the external auditor.
- DAll of the above.
11Which of the following is not part of the control environment?
- AMethods of assigning authority and responsibility.
- BManagement philosophy and operating style.
- CControl activities
- DPersonnel policies and practices.
12Which of the following best describes the purpose of personnel policies and procedures?
- AEnsure the organization has employees that are properly trained and supervised.
- BEnsure the organization complies with federal and state laws in its hiring and retention decisions.
- CEnsure the organization performs all of the above.
- DEnsure the organization hires the right people.
13Which of the following is a major component of an organization's internal control structure?
- AMajor new financing
- BTelecommunication equipment
- CRisk assessment
- DThe financial environment
14Internal controls may be preventive or detective. Which of the following controls is preventive?
- APreparing bank reconciliations
- BUsing batch totals
- CRequiring two persons to open mail containing payments
- DReconciling the accounts receivable subsidiary file with the control account.
15Which of the following is an inherent limitation of internal controls?
- ALack of auditor independence
- BEmployee peer review
- CSeparation of duties
- DCollusion
16Requiring the mail clerk to prepare a listing of all checks received, with copies of the list going to the cashier and to accounting, is an example of which type of control?
- ADetective
- BCorrective
- CPreventive
- DDirective
17Which of the following is an example of a physical control to safeguard assets?
- ASafety audits on the production line
- BHiring only trustworthy cashiers
- CSeparation of duties
- DLocks on warehouse doors
18A control designed to ensure that no employee is paid for more than 80 hours of sick pay is an example of which type of control?
- AEntity-wide control
- BInput control
- COutput control
- DProcessing control
19Which one of the following is not a control activity implemented in most accounting systems?
- ASegregation of duties
- BAuthorization procedures
- CAll of these activities are normally implemented
- DCompetent, trustworthy employees
20A control designed to ensure that sales transactions are generated using the company’s most current prices would be considered to be which type of control?
- AAn output control
- BA physical control
- CA processing control
- DAn input control
21Requiring two signatures on any check in excess of $10,000 is an example of which type of control?
- AProcessing control
- BInput control
- CPreventive control
- DDetective control
22A bank reconciliation is an example of which type of control?
- AAn input control
- BAn output control
- CA detective control
- DA preventive control
23Security management practices that limit access to technologies is a function included in which COSO component of internal control structure?
- AMonitoring
- BRisk assessment
- CControl activities
- DControl environment
24Which COSO component of internal control concerns the process of identifying, capturing, and exchanging information in a timely fashion to enable accomplishment of the organization’s objectives?
- AControl environment
- BMonitoring
- CInformation and communication
- DControl activities
25Which of the following groups is interested in an organization's control structure?
- ABoard members
- BLenders
- CAuditors
- DAll of the above
26The information and communication component of internal control includes which of the following?
- AThe organization deploys control activities through policies that establish what is expected and in procedures that put policies into action.
- BThe organization obtains or generates and uses relevant, quality information to support the functioning of other components of internal control.
- CThe organization identifies and assesses changes that could significantly impact the system of internal control.
- DAll of the above
27Which of the following activities would be an example of an ongoing evaluation?
- AAutomated review of all payments and transactions
- BMonthly bank statement reconciliations
- CPeriodic review of employee expense reimbursements
- DAll of the above
28Which of the following is not part of management’s report on internal controls?
- AThe framework used to evaluate internal control.
- BA statement indicating the extent of tests performed to assess controls.
- CAn assessment of the effectiveness of the company's internal control.
- DA statement that management is responsible for internal control.
29Which of the following best represents a walkthrough?
- AThe auditor walks the production line to find inefficiencies in the inventory process and reports them to management.
- BThe controller takes a sample of recorded write-offs to ensure they have been properly approved.
- CThe controller reviews the bank reconciliation prepared by the accountant and its resulting journal entries.
- DThe auditor traces three purchasing transactions from the purchase order to the financial statement for observation and understanding.
30Which of the following is the most severe?
- ASignificant deficiencies in internal control.
- BOperational deficiencies in internal control.
- CEach is equally severe because it could result in inaccuracies in financial reporting.
- DMaterial weaknesses in internal control.
31In a financial statement audit, what is the external auditor’s primary concern?
- ADetermining whether the internal controls promote efficiency.
- BDetecting all errors.
- CDetermining the effectiveness of operations.
- DDetermining whether the internal controls are effective.
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- Auditing Chapter 3 Homework
- Author
- Kayla Harbaugh
- Language
- English
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