chapter 1 | tf

Question 1

Corporate management (including the CEO) must certify monthly and annually their organization’s internal controls over financial reporting.

Answer 1

F

Question 2

Both the SEC and the PCAOB require management to use the COBIT framework for assessing internal control adequacy.

Answer 2

F

Question 3

Both the SEC and the PCAOB require management to use the COSO framework for assessing internal control adequacy.

Answer 3

F

Question 4

A qualified opinion on management’s assessment of internal controls over the financial reporting system necessitates a qualified opinion on the financial statements?

Answer 4

F

Question 5

The same internal control objectives apply to manual and computer-based information systems.

Answer 5

T

Question 6

The external auditor is responsible for establishing and maintaining the internal control system.

Answer 6

F

Question 7

Segregation of duties is an example of an internal control procedure.

Answer 7

T

Question 8

Preventive controls are passive techniques designed to reduce fraud.

Answer 8

T

Question 9

The Sarbanes-Oxley Act requires only that a firm keep good records.

Answer 9

F

Question 10

A key modifying assumption in internal control is that the internal control system is the responsibility of management.

Answer 10

T

Question 11

While the Sarbanes-Oxley Act prohibits auditors from providing non-accounting services to their audit clients, they are not prohibited from performing such services for non-audit clients or privately held companies.

Answer 11

T

Question 12

The Sarbanes-Oxley Act requires the audit committee to hire and oversee the external auditors.

Answer 12

T

Question 13

Section 404 requires that corporate management (including the CEO) certify their organization’s internal controls on a quarterly and annual basis.

Answer 13

F

Question 14

Section 302 requires the management of public companies to assess and formally report on the effectiveness of their organization’s internal controls.

Answer 14

F

Question 15

Application controls apply to a wide range of exposures that threaten the integrity of all programs processed within the computer environment.

Answer 15

F

Question 16

IT auditing is a small part of most external and internal audits.

Answer 16

F

Question 17

Advisory services is an emerging field that goes beyond the auditor’s traditional attestation function.

Answer 17

T

Question 18

An IT auditor expresses an opinion on the fairness of the financial statements.

Answer 18

F

Question 19

External auditing is an independent appraisal function established within an organization
to examine and evaluate its activities as a service to the organization.

Answer 19

F

Question 20

External auditors can cooperate with and use evidence gathered by internal audit departments that are organizationally independent and that report to the Audit Committee of the Board of Directors.

Answer 20

T

Question 21

Tests of controls determine whether the database contents fairly reflect the organization’s transactions.

Answer 21

F

Question 22

Audit risk is the probability that the auditor will render an unqualified opinion on
financial statements that are materially misstated.

Answer 22

T

Question 23

A strong internal control system will reduce the amount of substantive testing that must be performed.

Answer 23

T

Question 24

Substantive testing techniques provide information about the accuracy and completeness of an application’s processes.

Answer 24

F