Chapter 7 Flashcards
The auditor should evaluate whether internal controls are effective in accurately and fairly reflecting the firm’s transactions (T/F).
True
Management’s report should state its responsibility for establishing and maintaining an adequate internal control system (T/F)/
True
Management should identify material weaknesses in its report (T/F).
True
The auditor should provide recommendations for improving internal control in the audit report (T/F).
False
A control deviation caused by an employee performing a control procedure that he or she is not authorized to perform is always considered a…
Deficiency in Operation
The susceptibility of the related assets or liability to loss or fraud is a factor that might affect the likelihood that a control deficiency could result in a misstatement in an account balance (T/F).
True
The interaction or relationship of the control with other controls is a factor that might affect the likelihood that a control deficiency could result in a misstatement in an account balance (T/F).
True
The financial statement amounts exposed to the deficiency is a factor that might affect the likelihood that a control deficiency could result in a misstatement in an account balance (T/F).
False
The nature of the financial statement accounts, disclosure, and assertions involved are factors that might affect the likelihood that a control deficiency could result in a misstatement in an account balance (T/F).
True
Name 3 Entity level controls
- Controls to monitor results of operations
- Management’s risk assessment process
- Period-end financial reporting process
What type of controls would most likely be tested during an interim period?
Controls that operate on a continuous basis.
If the financial reporting risks for a location are low and the entity has good entity-level controls, management may rely on what?
Self-assessment processes in conjunction with entity-level controls.
What is a walkthrough?
An auditor traces a transaction from each major class of transaction from origination through the company’s information system until it is reflected in the company’s financial reports.
The inability to audit the effectiveness of internal controls due to management prevention should result in what type of opinion?
Disclaimer
What type of deficiency would result in an adverse opinion regarding the effectiveness of Internal Controls?
Material Weakness
