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The document consists of a review of the external audit process, presented in a multiple-choice format covering various aspects of auditing, including phases of the audit, audit evidence, internal controls, and auditor independence. It includes questions on the order of audit phases, types of audit procedures, and considerations for accepting new clients. The content serves as a study guide for understanding key concepts and practices in auditing.

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0% found this document useful (0 votes)
17 views17 pages

Topic 1

The document consists of a review of the external audit process, presented in a multiple-choice format covering various aspects of auditing, including phases of the audit, audit evidence, internal controls, and auditor independence. It includes questions on the order of audit phases, types of audit procedures, and considerations for accepting new clients. The content serves as a study guide for understanding key concepts and practices in auditing.

Uploaded by

rcllancian
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACAUD 4251 Topic 1 Review of the External Process

Multiple Choice.

1. Set the following phases in proper order:


i. Pre-Engagement
ii. Internal Controls
iii. Evidence-Gathering
iv. Planning
v. Post-Audit Responsibilities
vi. Reporting

A. i, ii, iii, iv, v, vi


B. i, iv, ii, iii, vi, v
C. i, iv, iii, ii, v, vi
D. i, iv, ii, iii, v, vi

2. Acts to be performed to obtain audit evidence.

A. Audit standards
B. Audit procedures
C. Audit program
D. Audit strategy

3. Audit procedures performed to obtain an understanding of the entity and its environment,
including its internal control, and to assess the risks of material misstatements at the financial
statement and assertion levels.

A. Risk assessment procedures


B. Tests of control
C. Substantive procedures
D. Analytical procedures

4. Audit procedures to test the operating effectiveness of controls on preventing or detecting


and correcting material misstatements at the assertion level.

A. Risk assessment procedures


B. Tests of control
C. Substantive procedures
D. Analytical procedures

5. Audit procedures to detect material misstatements at the assertion level.

A. Risk assessment procedures


B. Tests of control
C. Substantive procedures
D. Analytical procedures

1
6. If a company's external auditor expresses an unqualified opinion as a result of the audit of the
company's financial statements, readers of the audit report can assume that

A. The company is financially sound, and the financial statements are accurate
B. The external auditor found no fraud
C. Internal control is effective
D. All material disagreements between the company and the auditor about the application
of accounting principles were resolved to the satisfaction of the external auditor

7. If the auditor believes that the scope of the audit examination has resulted in the auditor being
unable to acquire sufficient appropriate evidence concerning an item included in the financial
statements, then the item's materiality will determine the choice of the proper audit opinion.
The choice could be

A. Either a qualified opinion or adverse opinion


B. Either a qualified opinion or disclaimer of opinion
C. Either an adverse opinion or disclaimer of opinion
D. Either an unqualified opinion or an adverse opinion

8. If the auditor determines that misstatements remain uncorrected by the client, then the
materiality of these misstatements will determine the choice of the proper audit opinion. The
choice could be

A. Either a qualified opinion or adverse opinion


B. Either a qualified opinion or disclaimer of opinion
C. Either an adverse opinion or disclaimer of opinion
D. Either an unqualified opinion or an adverse opinion

9. Ultimately, the decision about whether an auditor is independent must be made by

A. Auditor
B. Public
C. Client's management
D. Audit committee

10. Regarding independence, which of the following statements is correct?

A. Audit engagements provide assurance to a wide range of potential users; consequently,


both independence in mind and independence in appearance are of particular
importance.
B. Only the engagement partner is required by the Code of Ethics to be independent from
their assurance clients.
C. In the case of audits of financial statements, the Code of Ethics requires members of the
assurance team, the firm, but not network firms, to be independent of the client.
D. In the case of audits of financial statements, the Code of Ethics requires the auditor to be
independent from their assurance team from the start of performing procedures required
by the engagement up to the issuance of the report.

2
11. Which of the following would not be a consideration of a CPA firm in deciding whether to
accept a new client?

A. The client's financial ability.


B. The client's relations with its previous CPA firm
C. The client's standing in the business community
D. The client's probability of achieving an unqualified opinion.

12. Management's integrity affects all of the following risks except:

A. Business risk
B. Financial reporting risk
C. Audit risk
D. All of these risks are affected

13. Which of the following factors most likely would influence an auditor's determination of the
auditability of an entity's financial statements?

A. The operating effectiveness of control procedures


B. The existence of related-party transactions
C. The complexity of the accounting system
D. The adequacy of the accounting records

14. Prior to the acceptance of an audit engagement with a client who has terminated the services
of the predecessor auditor, the CPA should

A. Contact the predecessor auditor without advising the prospective client and request a
complete report of the circumstances leading to the termination of the engagement with
an understanding that all information disclosed will be kept confidential
B. Accept the engagement without contacting the predecessor auditor since the CPA can
include audit procedures to verify the reason given by the client for the termination
C. Not communicate with the predecessor auditor because this would in effect be asking the
auditor to violate the confidential relationship between an auditor and the client
D. Advise the client of the intention to contact the predecessor auditor and request a
permission for the contact

15. It involves establishing the overall audit strategy for the engagement developing an audit plan
in order to reduce audit risk to an acceptably low level

A. Reporting
B. Planning
C. Fieldwork
D. Organizing

3
16. Adequate planning of the audit work helps the auditor accomplish the following objectives,
except

A. Ensuring that appropriate attention is devoted to important areas of the audit


B. Identifying the areas that need the service of an expert
C. Gathering of all corroborating audit evidence
D. The audit work is completed efficiently

17. Which of the following statements is/are correct?


Statement 1: The client should plan the audit work so that the audit will be performed
effectively.
Statement 2: The auditor should develop and document an overall audit plan describing the
scope and conduct of the audit.

A. Only statement 1 is correct


B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

18. Which of the following activities should be performed by the auditor at the beginning of the
current audit engagement?
I. Perform procedures regarding the continuance of the client relationship and the specific
audit engagement
II. Evaluate compliance with the requirements of the Code of Ethics for Professional
Accountants in the Philippines, including independence.
III. Establish an understanding of the terms of the engagement.

A. I and II
B. II and III
C. I and III
D. I, II, and III

19. Which of the following procedures should be performed by the auditor prior to starting an
initial audit?
I. Perform procedures regarding the acceptance of the client relationship and the specific audit
engagements
II. Communicate with the previous auditor, where there has been a change of auditors, in
compliance with relevant ethical requirements

A. I only
B. II only
C. Both I and II
D. Neither I nor II

4
20. Which of the following statements is incorrect?

A. The auditor should plan the audit so that the engagement will be performed in an effective
manner.
B. Planning an audit involves establishing the overall audit strategy for the engagement and
developing the audit plan, in order to reduce audit risk to an acceptably low level
C. Planning involves the engagement partner and other key members of the engagement
team to benefit from their experience and insight and to enhance the effectiveness and
efficiency of the planning process
D. Planning is not a discrete phase of an audit, but rather a continual and iterative process
that often begins shortly after (or in connection with) the completion of the previous
audit and continues until the finalization of the audit program

21. The auditor should plan the audit work so that the audit will be performed in an effective
manner. The extent of planning will vary according to any of the following except:

A. Auditor's experience with the entity and knowledge of the business.


B. The nature and complexity of the audit engagement
C. The assessed level of control risk
D. Size of the audit client

22. Which of the following statements is/are correct?


Statement 1: Obtaining knowledge of the entity business is an important part of the planning
the audit work.
Statement 2: The auditor's knowledge of the entity's business assists in the identification of
events, transactions and practices which may have a material effect on the financial
statements.

A. Only statement 1 is correct


B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

23. The auditors' plan should: Succeed action, Be flexible, Be cost-beneficial

A. Yes, Yes, Yes


B. Yes, Yes, No
C. No, Yes, Yes
D. No, No, Yes

5
24. Which of the following statements is/are correct?
Statement 1: The overall audit plan and the audit program should not be revised during the
course of the audit.
Statement 2: The auditor should develop and document an audit program setting out the
nature, timing, and extent of planned audit procedures required to implement the overall
audit plan

A. Only statement 1 is correct


B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

25. Which of the following statements is/are correct?


Statement 1: According to PSA 300, the auditor may discuss elements of planning with those
charged with governance and the entity's management
Statement 2: The audit plan sets the scope, timing, and direction of the audit and guides the
development of the more detailed overall audit strategy.
Statement 3: The overall audit strategy is more detailed than the audit plan and includes the
nature, timing, and extent of audit procedures to be performed by engagement team
members to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably
low level

A. Only 1 statement is correct


B. Only 2 statements are correct
C. All of the statements are correct
D. All of the statements are incorrect

26. In planning the audit engagement, the auditor should consider each of the following, except

A. The kind of opinion (unqualified, qualified, or adverse) that is likely to be expressed


B. Matters relating to the entity's business and the industry in which it operates
C. The entity's accounting policies and procedures
D. Materiality level and audit risk

27. Which of the following is least likely considered by the CPA when he/she makes an overall
audit plan?

A. The nature and timing of reports and other communication with the entity that are
expected under the engagement
B. Identification of complex accounting areas including those involving accounting estimates
C. The effect of information technology on the audit
D. The content of the representation letters

6
28. Which of the following matters should be considered by the auditor in developing the overall
audit strategy?

A. Important characteristics of the entity, its business, its financial performance and its
reporting requirements including changes since the date of the prior audit
B. Conditions requiring special attention, such as the existence of the related parties
C. The setting of materiality level for audit purposes
D. All of the above

29. In developing the overall audit strategy, the focus of the engagement team's efforts is
considered. Which of the following is not appropriately classified as a factor affecting the focus
of the team's efforts?

A. The financial reporting framework on which the financial information to be audited has
been prepared, including any need for reconciliation to another reporting framework
B. Setting materiality for planning purposes
C. Audit areas where there is a higher risk of material misstatement
D. Volume of transactions, which may determine whether it is more efficient for the auditor
to rely on internal control

30. It is the process designed and effected by those charged with governance, management, and
other personnel to provide reasonable assurance about the achievement of the entity's
objectives.

A. Internal auditing
B. Internal control
C. Business strategy
D. Accounting process

31. A reason to establish internal control is to:

A. Provide reasonable assurance that the objectives of the organization are achieved
B. Ensure the accuracy, reliability, and timeliness of information
C. Encourage compliance with the organizational objectives
D. Have a basis for planning the audit

32. This is a basic concept of internal control which recognizes that the cost of internal control
should not exceed the benefits expected to be derived from it

A. Management by exception
B. Management responsibility
C. Limited liability
D. Reasonable assurance

7
33. Internal controls are not designed to provide reasonable assurance that

A. The recorded accountability for assets is compared with the existing assets at reasonable
intervals
B. Access to assets is permitted only in accordance with management's authorization
C. Transactions are executed in accordance with management’s authorization
D. Irregularities will be eliminated

34. Internal control can only provide reasonable, not absolute assurance of achieving entity
control objectives. One of the factors limiting the likelihood of achieving those objectives is
that:

A. The auditor's primary responsibility is the detection of fraud


B. The board of directors is active and independent
C. The cost of internal control should not exceed its benefits
D. Management monitors internal control

35. Which of the following is an example of an inherent limitation in a client's internal control
system?

A. The effectiveness of procedures depends on the segregation of employee duties


B. Procedures are designed to assure the execution and recording of transactions in
accordance with management's authorization
C. In the performance of most control procedures, there are possibilities of errors arising
from mistakes in judgement.
D. Procedures for handling large numbers of transactions are processed by information
technology (IT) equipment.

36. PSA 315 Redrafted requires the auditor to obtain an understanding of the client's internal
controls

A. For every audit


B. For first-time audits
C. Whenever it would be appropriate
D. Sufficient to find any frauds which may exist.

37. The primary purpose of the auditor's consideration of internal control is to provide a basis for

A. Determining whether procedures and records that are concerned with the safeguarding
of assets are reliable
B. Constructive suggestions to clients concerning deficiencies in internal control
C. Determining the nature, timing, and extent of audit tests to be applied
D. The expression of an opinion

8
38. In an audit of financial statements, an auditor's primary consideration regarding a control is
whether it:

A. Reflects management's philosophy and operating style


B. Affects management's financial statement assertions
C. Enhances management’s decision-making processes
D. Provides adequate safeguards over access to assets

39. The following are components of internal control:

A. Organizational structure, management philosophy, and planning


B. Control environment, risk assessment process, control activities, information system
and communication, and monitoring of controls
C. Risk assessment process, backup facilities, responsibility accounting and natural laws
D. Legal environment of the firm, management philosophy, and organizational structure

40. Which of the following statements best describes "control environment"?

A. Policies and procedures that help ensure that management directives are carried out.
B. The system for transferring information from transaction processing systems to the
general ledger or the financial reporting system
C. The entity's process for identifying business risks relevant to financial reporting objectives
and deciding about actions to address those risks and the results thereof.
D. This includes the governance and management functions and the attitudes, awareness,
and actions of those charged with governance and management concerning the entity's
internal control and its importance to the entity.

41. Which of the following considered control environment elements? Commitment to


competence, Detection Risk, Organizational Structure

A. Yes, No, Yes


B. Yes, Yes, Yes
C. No, No, No
D. No, No, Yes

42. An entity's risk assessment process includes how management: Identifies risk, Assess
significance and likelihood of occurrence of these identified risks, Decides upon actions to
manage these risks

A. Yes, Yes, Yes


B. Yes, Yes, No
C. No, Yes, Yes
D. Yes, No, No

9
43. Risks can arise or change due to circumstances such as the following, except:

A. There is a change in the regulatory or operating environment (i.e. a new law has been
passed which prohibits the use of a chemical which is a main ingredient of the company's
major product)
B. New employees have been hired by the company
C. The company switched from manual information systems to a computerized system
D. The accounting and financial reporting framework has remained stable for the past five
years, and no new pronouncements have been made

44. As part of a periodic planning exercise, The James Sunderland Company discovers that a
political dispute may interfere with the company's supply sources. This is an example of:

A. Control environment
B. Risk assessment
C. Control activities
D. Monitoring of controls

45. Before accepting an audit engagement, a successor auditor should make specific inquiries of
the predecessor auditor regarding:

A. The predecessor's evaluation of matters of continuing accounting significance


B. Disagreement which the predecessor had with the client concerning auditing
procedures and accounting principles
C. The degree of cooperation the predecessor received concerning the inquiry of the client's
legal counsel
D. The predecessor's assessment of inherent risk and judgments about materiality

46. If the prospective client refuses to permit the predecessor to respond or limits the
predecessor's response, the successor should:

A. Continue to ask the predecessor auditor questions on facts that might bear on the integrity
of management
B. Accept the engagement but only after an equitable increase in the professional fee
C. Inquire as to the reasons and consider the implications in deciding whether to accept
the engagement
D. Issue a disclaimer of opinion because the limited response of the predecessor auditor
constitutes a significant scope limitation

47. If permission from the client to discuss its affairs with the proposed auditor is denied by the
client, the predecessor auditor should:

A. Keep silent of the denial


B. Disclose the fact that the permission to disclosure is denied by the client
C. Disclose adequately to proposed auditor all noncompliance made by the client
D. Seek legal advice before responding to the proposed auditor

10
48. A firm has obtained information that would have caused it to decline an engagement had the
information been available earlier. Actions available to the auditor would include the
following, except:

A. Reporting the information and its implications to the person/s who appointed the CPA
B. Withdraw from the client relationship
C. Withdraw from the engagement
D. Issue a disclaimer of opinion

49. According to PSA 210, the auditor and the client should agree on the terms of engagement.
The agreed terms would need to be recorded in a(n)

A. Memo placed in the permanent section of the working papers


B. Client representation letter
C. Engagement letter
D. Comfort letter

50. An engagement letter is best described as

A. A letter from the company to the auditors specifying management's expectations for
completion of the audit on a timely basis and the fees.
B. A letter from the auditors to company management specifying that management is
responsible for the financial statements, and the auditors will issue an opinion on the
financial statements.
C. A letter from the auditors to company management that specifies the responsibilities of
both the company and the auditors in completing the audit and the timing for its
completion
D. A letter from the Board of Directors' audit committee to the auditor that indicates the
auditor has been engaged to perform the audit and the fees to be paid

51. An engagement letter is prepared with the interest(s) of:

A. The auditor only


B. The client only
C. The public
D. Both the client and the auditor

52. Which of the following statements is/are correct?


Statement 1: The auditor and the client should agree on the terms of the engagement. Such
an agreement may be in the form of audit engagement letter or other suitable form of
contract.
Statement 2: Even in those countries where the scope of the audit is established by law, an
engagement letter may be informative for the client.

A. Only statement 1 is correct


B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

11
53. Engagement letters are widely used in practice for:

A. Professional engagements of all types


B. Assurance engagements only
C. Related services only
D. Audits only

54. The primary purpose of the engagement letter is to:

A. Satisfy the requirements of the CPA's liability insurance policy


B. Remind management that the primary responsibility for the financial statements rests
with management
C. Provide a written record of the agreement with the client as to the services to be
provided
D. Provide a starting point for the auditor's preparation of the preliminary audit program

55. An audit engagement letter least likely include:

A. A reference to the inherent limitations of an audit that there is an unavoidable risk that
some material misstatements may remain undiscovered
B. Description of any letters or reports that the auditor expects to submit to the client
C. Identification of specific audit procedures that the auditor needs to undertake
D. Basis on which fees are computed and any billing arrangements

56. Which of the following matters is generally included in an auditor's engagement letter?

A. The factors to be considered in setting preliminary judgments about materiality


B. Management's vicarious liability for illegal acts committed by its employees
C. Management's responsibility for the entity's compliance with laws and regulations
D. The auditor's responsibility to search for significant internal control deficiencies

57. The form and content of the audit engagement letters may vary for each client, but they would
generally include reference to except:

A. Management's responsibility for all the financial statements.


B. The scope of the audit, excluding reference to applicable legislation, regulations, or
pronouncements of professional bodies to which the auditor adheres.
C. The form of any reports or any communication of results of engagement.
D. Unrestricted access to whatever records, documentation and other information requested
in connection with the audit.

58. Arrangements concerning with which of the following are least likely to be included in the
engagement letter?

A. Fees and billing


B. A predecessor auditor
C. CPA investment in client securities
D. Other services to be provided in addition to the audit

12
59. Which of the following statements would least likely appear in an auditor's engagement letter?

A. "Fees for our services are based on regular per diem rates, plus travel and other out-of-
pocket expenses.”
B. "During the course of our audit, we may observe opportunities for economy in, or
improved controls over your operations."
C. "Our engagement is subject to the risk that material misstatements of fraud, if they exist,
will not be detected."
D. “After performing our preliminary analytical procedures we will discuss with you the
other procedures we consider necessary to complete the engagement"

60. With respect to planning an audit, which of the following statements is always true?

A. An inventory count must be observed at year-end.


B. An engagement should not be accepted after the client's year-end.
C. Final staffing decisions must be made prior to completion of the planning stage.
D. It is acceptable to perform a portion of the audit of a continuing client at interim dates.

61. In planning stage of an audit engagement, the auditor is required to perform audit procedures
to obtain an understanding of the entity and its environment, including its internal control.
These procedures are called:

A. Substantive tests
B. Risk assessment procedures
C. Test of controls
D. Dual-purpose tests

62. Analytical procedures used in planning an audit should focus on identifying:

A. Material weaknesses in the internal control system


B. The predictability of financial data from individual transactions
C. The various assertions that are embodied in the financial statements
D. Areas that may represent specific risks relevant to the audit

63. Analytical procedures are required: As a risk assessment procedure performed during
planning, As a substantive test procedure during evidence gathering, As an overall review at
audit completion

A. Yes, Yes, No
B. Yes, Yes, Yes
C. Yes, No, No
D. Yes, No, Yes

13
64. The objective of performing analytical procedures in planning an audit engagement is to
identify the existence of:

A. Related party transactions


B. Unusual transactions and events
C. Recorded transactions that were not properly authorized
D. Illegal acts that went undetected because of internal control weaknesses

65. Which of the following procedures would an auditor most likely perform in planning an audit
of financial statements?

A. Inquiring of the client's legal counsel concerning pending litigation.


B. Comparing the financial statements to anticipated results.
C. Examining computer-generated exception reports to verify the effectiveness of internal
controls.
D. Searching for unauthorized transactions that may aid in detecting unrecorded liabilities.

66. Analytical procedures used in planning an audit should focus on

A. Reducing the scope of tests of controls and substantive tests


B. Providing assurance that potential misstatements will be identified
C. Enhancing the auditor's understanding of the client's business.
D. Assuming the adequacy of the available evidential matter.

67. This serves as the set of instructions to assistants involved in the audit and as a means to
control and record the proper execution of the work of the personnel involved in the service

A. Audit procedures
B. Audit plan
C. Audit program
D. Audit risk model

68. The auditor should design the written audit program, so that:

A. All material transactions will be selected for substantive testing.


B. Substantive tests prior to the balance sheet date will be minimized.
C. The audit procedures selected will achieve specific audit objectives.
D. Each account balance will be tested under either tests of controls or tests of transactions.

69. In designing audit programs, an auditor should establish specific audit objectives that related
primarily to the

A. Selected audit techniques


B. Timing of audit procedures
C. Financial statement assertions
D. Cost-benefit gathering evidence

14
70. The auditor should document the overall audit strategy and the audit plan, including
significant changes made during the audit engagement. Which of the following statements on
documentation is incorrect?

A. Documentation of the overall audit strategy may be made in the form of a memorandum
that contains key decisions regarding the overall scope, timing and conduct of the audit.
B. The auditor may use standard audit programs or audit completion checklists, but such
programs and checklists need to be tailored to the particular client.
C. The auditor's documentation of any significant changes to the originally planned overall
audit strategy and to the detailed audit plan need not include the reasons for the
significant changes.
D. The form and extent of documentation depend on such matters as the size and complexity
of the entity, materiality, the extent of other documentation, and the circumstances of the
specific engagement.

71. Audit procedures may be classified as risk assessment procedures and further audit
procedures. Which of the following best describes risk assessment procedures?

A. These procedures are used detect material misstatements at the assertion level.
B. These procedures include tests of details of classes of transactions, account balances, and
disclosures and analytical procedures.
C. These procedures test the operating effectiveness of controls in preventing, or detecting
and correcting, material misstatements at the assertion level.
D. These are procedures for obtaining an understanding of the entity and its environment,
including its internal control, to assess the risks of material misstatement at the financial
statement and assertion levels.

72. The audit program should contain the following, except:

A. Audit objective
B. Set of planned audit procedures
C. Time budget for the various audit areas
D. The combined assessed level of inherent and control risk

73. Which of the following procedures is not performed as a part of planning an audit
engagement?

A. Reviewing working papers of the prior year


B. Performing analytical procedures
C. Designing an audit program
D. Test of controls

15
74. Cost-benefit considerations are part of audit planning. In relation to this, which of the
following audit procedures is usually the least costly to perform?

A. Tests of balances
B. Tests of transactions
C. Analytical procedures
D. Tests of controls

75. Under PSA 315, monitoring of controls is an internal control component that involves a process
of assessing the quality of internal control performance over time. It involves assessing the
design and operation of controls on a timely basis and taking necessary corrective actions.
Monitoring of controls is accomplished through ongoing monitoring activities, separate
evaluations, or a combination of the two. An entity's ongoing monitoring activities often
include

A. Periodic reporting by the entity's internal auditors about the functioning of internal control
B. The audit of the annual financial statements
C. Periodic audits by the audit committee
D. Reviewing the purchasing account

76. Control activities constitute one of the five components of internal control. Which of the
following is not included in this internal control component?

A. Segregation of duties
B. Performance reviews
C. An internal audit function
D. Authorization

77. Which of the following statements concerning the relevance of various types of controls to a
financial statement audit is correct?

A. All controls are ordinarily relevant to a financial statement audit.


B. Controls over the reliability of assets and liabilities are of primary importance, while
controls over the reliability of financial reporting may also be relevant.
C. Controls over the reliability of financial reporting are ordinarily most directly relevant to
a financial statement audit, but other controls may also be relevant.
D. An auditor may ordinarily ignore a consideration of controls when a substantive audit
approach is taken.

78. An internal control system that is working effectively

A. Eliminates risk and potential loss of to the entity


B. Cannot be circumvented by management
C. Reduces the need for management to review exception reports on a day-to-day basis
D. Is unaffected by changing circumstances and conditions encountered by the entity

16
79. When obtaining knowledge about an entity's internal control, it is important for the auditor to
consider the competence of its employees, because their competence bears directly and
importantly upon the

A. Cost-benefit relationship of internal control


B. Comparison of recorded accountability with assets
C. Achievement of the objectives of internal control
D. Timing of substantive tests to be performed

80. Obtaining an understanding of internal control involves: Evaluating the design of a control,
Determining whether the control has been implemented, Testing the effectiveness of a control

A. Yes, Yes, Yes


B. Yes, Yes, No
C. Yes, No, Yes
D. No, Yes, Yes

17

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