1 The PCA0B's AS 2201 states that internal controls may be preventive or deteci Which of the following controls is preventive? A. Requiring two persons to open mail. B. Reconciling the accounts receivable subsidiary file with the control account. C. Using batch totals. D. Preparing bank reconciliations. 12] The primary reason to establish internal control is to A. Safeguard the resources of the organization. B. Provide reasonable assurance that the objectives of the organization are achieved. C. Encourage compliance with organizational objectives. D. Ensure the accuracy, reliability, and timeliness of information. 3] Effective internal control A. Reduces the need for management to review exception reports on a day-to-day basis B. Eliminates risk and potential loss to the organization. C. Cannot be circumvented by management. D. ls unaffected by changing circumstances and condions encountered by the organization. [4] Which of the following most likely would not be considered an inherent limitation of the potential effectiveness of an entity's internal control? A. Incompatible duties. B. Management override C. Faulty judgment. D. Collusion among employees. 15] Internal control can provide only reasonable assurance of achieving an entity's control objectives. The likelihood of achieving those objectives is affected by which limitation inherent to internal control? 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. [6] When obtaining an understanding of intenal control in a financial statement audit, the independent extenal auditor is primarily concerned with A. Detecting all errors. B. Determining the effectiveness of operations. C. Assessing the risk of material misstatement. D. Determining its efficiency. 71 The requirement of the Foreign Comupt Practices Act of 1977 to devise and maintain adequate intemal control is assigned in the act to the A. Chief financial officer. B. Board of directors. C. Director of intenal auditing. D. Company as a whole, with no designation of specific persons or positions. [8] An extemal auditor cannot A. Express an opinion on a client's assertions about internal control. B. Express an opinion on the faimess of the financial statements of a nonissuer C. Make specific recommendations to a client with respect to internal control weaknesses. cuside parties rearding a dlients compliance wih the intermal controi provisions of the Foreign Comupt Practices Act. (9] Which of the following are considered control environment factors? Detection Risk Yes Yes No No Human Resources Policies and Practices Yes No Yes No A. . D. [10] Organizational charts are useful to an independent extemal auditor because they A. Depict all lines of organizational communication. B. Provide a starting point for assessing the risk of material misstatement. C. Ensure the proper division of responsibilities. D. Are essential to effective internal control. [11] The single most effective control established to avoid allowing any person to be in a position to perpetrate and then conceal errors or fraud is to A. Establish separate functional responsibilites for asset custody, recordkeepi ng, and enr A 8 authorization. B. Require each employee to take a vacation each year. C. Establish an internal auditing department D. Require the bonding of personnel in positions that necessitate handling of cash and other universally desirable valuables. [12] The ultimate purpose of understanding the entity and its environment and assessing risks of material misstatement is to contribute to the auditor's assessment of the risk that A. Tests of controls may fail to identifty procedures relevant to assertions. B. Material misstatements may exist in the financial statements. C. Specified controls requiring segregation of duties may be circumvented by collusion. D. Entity policies may be inappropriately overridden by senior management. 131 Which of the following statements indicates the wrong way to use an internal co questionnaire? A. Clarifying all answers with written remarks and explanations. B. Filling out the questionnaire during an interview with the person who has responsibility area that is being audited. C. Constructing the questionnaire so that a no response requires attention. D. Supplementing the completed questionnaire with a narrative description or flowchart. for the [14] The auditor's understanding of intemal control is documented to substantiate A. Conformity of the accounting records with generally accepted accounting principles. B. Compliance with generally accepted auditing standards. C. Adherence to procedures for effective and efficient management decision making. D. The faimess of the financial statement presentation. [151 In order to obtain an initial understanding of internal control suficient to assess the risk of material misstatement of the financial statements, an auditor would most likely perform which of the following procedures? A. Tests of key controls to determine whether they are effective. B. Expanded substantive testing to identity relevant controls. C. Analytical procedures to determine the need for specific controls. D. Risk-assessment procedures to evaluate the design of relevant controls. [16) A questionnaire consists of a series of questions relating to controls normally required to prevent or detect errors and fraud that may occur for each type of transaction. Which of the following is not an advantage of a questionnaire? A. A questionnaire provides a framework that minimizes the possibility of overlooking aspects of internal control. B. A questionnaire can be easily completed. C. A questionnaire is flexible in design and application. D. The completed questionnaire provides documentation that the auditor understands internal control for planning purposes. [17] The primary purpose of an intenal control questionnaire is to A. Gain an understanding of the controls. B. Establish the level of compliance with controls. C. Determine the control environment in the department. D. Establish the time budget for the audit. O2019 Gleim Publications Inc. Internal Control 3 [18] Which of the following best describes the major disadvantage of using a questionnaire rather than a flowchart to evaluate internal controls? A. Questionnaires usually take more time to complete and are more cumbersome. B. Responses do not efficiently flag potential intermal control weaknesses. C. It is difficult for auditors to develop or obtain questionnaires that are appropriate for most internal control systems. D. Questionnaires may be routinely completed without auditors really understanding overall operations of internal control systems. [19] One of the auditor's major concerns is to ascertain whether internal control is designed to provide reasonable assurance that A. Profit margins are maximized, and operational efficiency is optimized. B. The chief accounting officer reviews all accounting transactions. C. Corporate morale problems are addressed immediately and effectively. D. Financial statements are fairly presented. [20] The diamond-shaped symbol is commonly used in fowcharting to show or represent a A. Process or a single step in a procedure or program. B. Terminal output display C. Decision point, conditional testing, or branching. D. Predefined process. 121] Which one of the following best reflects the basic elements of a data flow diagram? A. Data sources, data flows, computer configurations, flowchart, and data storage. B. Data source, data destination, data flows, transformation processes, and data storage. C. Data flows, data storage, and program flowchart. D. Data flows, program flowchart, and data destination