1. Explain what internal controls are and how they relate to the audit. What effect do internal controls have on the job of the independentauditor?Your answer should discuss the relationship between internal controls and the financial statements. In answering your questions, consider whether good internal controls contribute to the accuracy of financial statements. On the other hand, explore the possibility that financial statements can be accurate even if internal controls are poor. You may give an example of an internal control procedure.

2. Commonly misunderstood facts about a corporate audit of financial statements:

Terrible internal controls will result in a bad audit opinion.

A client that violates the law will result in a bad audit opinion.

A client that has a terrible business will result in a bad audit opinion.

In one or two sentences, explain why each of the following statements areuntrue.

Terrible internal controls will result in a bad audit opinion.

A client that violates the law will result in a bad audit opinion.

A client that has a terrible business will result in a bad audit opinion.

In addition to the textbook, you may want to take the multiple-choice quiz first. After you submit your answers I will provide you with the answer key. Then read the explanations to the answers, particularly on internal controls, to gain further insight.