Internal Control Flashcards
Assessing control risk at below the maximum level most likely would involve
Identifying specific internal control structure policies and procedures relevant to specific assertions.
What are the component of internal control
COSO’s Internal Control Integrated Framework identifies five components of an internal control system: (1) control environment; (2) risk assessment; (3) control activities; (4) information and communication system; and (5) monitoring.
An auditor should obtain sufficient knowledge of an entity’s accounting system to understand the
Process used to prepare significant accounting estimates
What actions should the auditor take in response to discovering a deviation from the prescribed control procedure?
Make inquiries to understand the potential consequence of the deviation
In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required to
Document the auditor’s understanding of the entity’s internal control structure.
The objective of tests of details of transactions performed as tests of controls is to
Evaluate whether an internal control structure policy or procedure operated effectively
Which auditor concern most likely could be so serious that the auditor concludes that a financial statement audit cannot be performed?
There is a substantial risk of intentional misapplication of accounting principles.
Which of the following statements concerning an auditor’s communication of significant deficiencies is correct?
Any report issued on significant deficiencies should indicate that providing assurance on the internal control structure was not the purpose of the audit
When assessing the internal auditors’ competence, the independent CPA should obtain information about the
Educational background and professional certification of the internal auditors.
When assessing the competence of the internal auditors, an independent CPA should obtain information about the
Quality of the internal auditors’ working paper documentation.
In assessing the objectivity of internal auditors, the independent CPA who is auditing the entity’s financial statements would most likely consider the
Internal auditing standards developed by The Institute of Internal Auditors.
When considering the objectivity of internal auditors, an independent auditor should
Determine the organizational level to which the internal auditors report.
What would most likely be the result of ineffective internal control policies and procedures in the revenue cycle?
Final authorization of credit memos by personnel in the sales department could permit an employee defalcation scheme
Tracing bills of lading to sales invoices provides evidence that
Shipments to customers were invoiced
The procedure which would most likely not be an internal control procedure designed to reduce the risk of errors in the billing process?
Reconciling the control totals for sales invoices with the accounts receivable subsidiary ledger
Which internal control procedure would most likely assure that all billed sales are correctly posted to the accounts receivable ledger?
Daily sales summaries are compared to daily postings to the accounts receivable ledger
An auditor would be most likely to limit substantive audit tests of sales transactions when control risk is assessed as low for the existence or occurrence assertion concerning sales transactions and the auditor has already gathered evidence supporting
Cash receipts and accounts receivable
An auditor would consider a cashier’s job description to contain compatible duties if the cashier receives remittances from the mailroom and also prepares the
Daily deposit slip
Employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals and
Deter dishonesty by making employees aware that insurance companies may investigate and prosecute dishonest acts
The authority to accept incoming goods in receiving should be based on a(an)
Approved purchase order
