27) The Committee of Sponsoring Organizations (COSO) report identified five
interrelated components of internal control. Since then, a sixth category has
been identified, which is A. antifraud
programs and controls. B. risk assessment. C. information and communication.
D. monitoring.
28) “A significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected” is
the definition of a A. material misstatement. B. significant deficiency. C.
control deficiency. D. material
weakness.
29) Which of the following is NOT one of the four basic functions of every transaction? A. Delivery and receipt B. Consideration
C. Initiation D. Recording
30) Which of the following tests of controls would be most effective in testing controls
designed to prevent checks from being issued or recorded for the wrong amount?
A. Observing documents being marked or cancelled as paid B. Observing bank
reconciliations C. Computer-assisted
audit techniques, such as test data to test computer application control D.
Observing segregation of duties
31) To
emphasize the importance of integrity and ethical values among all personnel or
an organization, the chief executive officer and other top managers should do
all of the following EXCEPT A. reduce or eliminate incentives and temptations.
B. set the tone by example. C. send
e-mail messages to all employees, promoting ethical values. D. communicate
to all employees.
32) Which of
the following is NOT one of the factors that make up the control environment?
A. Human resource policies and practices B. Accounting personnel C. Organizational structure D. Board of
directors and audit committee
33) Which of
the following is NOT a characteristic of management's philosophy and operating
style? A. Its attitudes and actions toward financial reporting B. Approach to
taking and monitoring business risks C. Conscientiousness and conservatism in
developing accounting estimates D. Monitoring
policies for developing and modifying accounting systems
34) In
performing tests of details of balances, the auditor would obtain the bank
statement directly from the bank, prepare the bank reconciliation, and verify
all reconciling items and mathematical accuracy if detection risk was A. very low. B. very high. C. moderate.
D. high.
35) An
inaccurate form of the audit risk model would show that A. detection risk is
inversely related to inherent risk. B. detection risk may be determined from
audit risk, inherent risk, and control risk. C. increases in control risk will
cause decreases in detection risk. D. audit risk is directly related to all
other risks in the model. E. detection
risk is inversely related to audit risk.
36) Who is
responsible for establishing the process and controls for preparing accounting
estimates? A. The audit committee B. The independent auditor C. Management D. The internal auditor
37) Which of the following is NOT an advantage of PPS sampling? A. PPS sampling is generally
easier to use than classical variables sampling. B. PPS systematic sample selection automatically identifies any item that is individually significant if its value is less than an upper monetary cutoff. C. PPS sampling automatically results in a stratified sample. D. PPS sampling,
if the auditor expects no misstatements, will usually result in a smaller
sample size than under classical sampling.
38) PPS sampling should NOT be used when A. there are some zero-balance items in the population. B. few or no misstatements are expected. C. testing investment securities. D. any
misstatements are expected to be overstatements.
interrelated components of internal control. Since then, a sixth category has
been identified, which is A. antifraud
programs and controls. B. risk assessment. C. information and communication.
D. monitoring.
28) “A significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected” is
the definition of a A. material misstatement. B. significant deficiency. C.
control deficiency. D. material
weakness.
29) Which of the following is NOT one of the four basic functions of every transaction? A. Delivery and receipt B. Consideration
C. Initiation D. Recording
30) Which of the following tests of controls would be most effective in testing controls
designed to prevent checks from being issued or recorded for the wrong amount?
A. Observing documents being marked or cancelled as paid B. Observing bank
reconciliations C. Computer-assisted
audit techniques, such as test data to test computer application control D.
Observing segregation of duties
31) To
emphasize the importance of integrity and ethical values among all personnel or
an organization, the chief executive officer and other top managers should do
all of the following EXCEPT A. reduce or eliminate incentives and temptations.
B. set the tone by example. C. send
e-mail messages to all employees, promoting ethical values. D. communicate
to all employees.
32) Which of
the following is NOT one of the factors that make up the control environment?
A. Human resource policies and practices B. Accounting personnel C. Organizational structure D. Board of
directors and audit committee
33) Which of
the following is NOT a characteristic of management's philosophy and operating
style? A. Its attitudes and actions toward financial reporting B. Approach to
taking and monitoring business risks C. Conscientiousness and conservatism in
developing accounting estimates D. Monitoring
policies for developing and modifying accounting systems
34) In
performing tests of details of balances, the auditor would obtain the bank
statement directly from the bank, prepare the bank reconciliation, and verify
all reconciling items and mathematical accuracy if detection risk was A. very low. B. very high. C. moderate.
D. high.
35) An
inaccurate form of the audit risk model would show that A. detection risk is
inversely related to inherent risk. B. detection risk may be determined from
audit risk, inherent risk, and control risk. C. increases in control risk will
cause decreases in detection risk. D. audit risk is directly related to all
other risks in the model. E. detection
risk is inversely related to audit risk.
36) Who is
responsible for establishing the process and controls for preparing accounting
estimates? A. The audit committee B. The independent auditor C. Management D. The internal auditor
37) Which of the following is NOT an advantage of PPS sampling? A. PPS sampling is generally
easier to use than classical variables sampling. B. PPS systematic sample selection automatically identifies any item that is individually significant if its value is less than an upper monetary cutoff. C. PPS sampling automatically results in a stratified sample. D. PPS sampling,
if the auditor expects no misstatements, will usually result in a smaller
sample size than under classical sampling.
38) PPS sampling should NOT be used when A. there are some zero-balance items in the population. B. few or no misstatements are expected. C. testing investment securities. D. any
misstatements are expected to be overstatements.
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