1. Which of the following elements is most likely to be a component of a direct reporting assurance engagement?

a. low level of assurance

b. absolute assurance

c. a written assertion

d. auditor independence

2. Assertions are representations by management, explicit or otherwise, that are embodied in the financial statements. Management's assertions in the financial statements are of relevance to the audit process because:

a. they relate more to the audit while the financial statements belong to the auditor

b. they are utilized by auditors in developing proper tests and procedures

c. they are the procedures that will be performed by the audit team

d. they are direct evidence that the management has prepared financial statements in accordance with generally accepted audit standards

3. Which of the following internal control is most likely to an audit of financial statements

a. An airline automated controls that maintain flight schedules

b. A furniture manufacturer controls for incidental sales of scrap materials that accounts for less than 5% of total sales

c. a tv manufacturer's computerized production scheduling system

d. a bank's loan approval process

4.Which of the following is not an assurance to be provided by an effective internal control system?

a.Management is responsible for knowledge and authorization of transaction

b.Transaction are recorded to permit the preparation of reliable financial statements

c.Transaction are recorded to maintain accountability for assets

d.Access to assets is limited to members of management

5.Which of the following is incorrect regarding control environment component of internal control?

a.The foundation for the other components of internal control to function as control environment provides discipline and structure

b.To understand the control environment, the auditor considers programs and controls addressing fraud risk implemented by management and those charged with governance

c.The evaluation of design of the control environment includes considering seven elements of control environment

d.The absence of programs and controls addressing fraud risk of control environment may not represent a material weakness