1832. Multiple Choice Questions Select the best answer for each of the following questions. Explain the reasons for your selection: a. In an integrated audit, which of the following must the auditors communicate to the audit committee? Known Material Known Signifi cant Weaknesses Defi ciencies (1) Yes Yes (2) Yes No (3) No Yes (4) No No b. In an integrated audit, which of the following lead(s) to an adverse opinion on internal control? Known Material Known Signifi cant Weaknesses Defi ciencies (1) Yes Yes (2) Yes No (3) No Yes (4) No No c. In an integrated audit, which of the following must be communicated by management to the audit committee? Known Material Known Signifi cant Weaknesses Defi ciencies (1) Yes Yes (2) Yes No (3) No Yes (4) No No d. Which of the following is most likely to be considered a material weakness in internal control? (1) Ineffective oversight of fi nancial reporting by the audit committee. (2) Restatement of previously issued fi nancial statements due to a change in accounting principles. (3) Inadequate controls over nonroutine transactions. (4) Weaknesses in risk assessment. e. Which of the following is defi ned as a weakness in internal control that allows a reasonable possibility of a misstatement that is material? (1) Control defi ciency. (2) Material weakness. (3) Reportable condition. (4) Signifi cant defi ciency. f. The auditors identifi ed a material weakness in internal control in August. The client was informed and the client corrected the material weakness prior to year-end (December 31); the auditors concluded that management eliminated the material weakness prior to yearend. The appropriate audit report on internal control is: (1) Adverse. (2) Qualified.

(3) Unqualifi ed. (4) Unqualifi ed with explanatory language relating to the material weakness. g. Which of the following need not be included in managements report on internal control under Section 404(a) of the Sarbanes-Oxley Act of 2002? (1) A statement that the companys auditors have issued an attestation report on managements assertion. (2) An identifi cation of the framework used for evaluating internal control. (3) Managements assessment of the effectiveness of internal control. (4) Managements acknowledgment of its responsibility to establish and maintain internal control that detects all signifi cant defi ciencies. h. Managements documentation of internal control ordinarily should include information on: Controls Designed Controls Designed to Ensure to Prevent Fraud Employee Personal Integrity (1) Yes Yes (2) Yes No (3) No Yes (4) No No i. A material weakness is a control defi ciency (or combination of control defi ciencies) that results in a reasonable possibility that a misstatement of at least what amount will not be prevented or detected? (1) Any amount greater than zero. (2) A greater amount than zero, but an amount that is at least inconsequential. (3) A greater amount than inconsequential. (4) A material amount. j. A procedure that involves tracing a transaction from origination through the companys information systems until it is refl ected in the companys fi nancial report is referred to as a(n): (1) Analytical analysis. (2) Substantive test. (3) Test of a control. (4) Walk-through. k. Which of the following is not a typical question asked during a walk-through? (1) Have you ever been asked to override the process or controls? (2) What do you do when you fi nd an error? (3) What is the largest fraudulent transaction you ever processed? (4) What kind of errors have you found? l. An audit of internal control over fi nancial reporting ordinarily assesses internal control: (1) As of the last day of the fi scal period. (2) As of the last day of the auditors fi eldwork. (3) For the entire fi scal period. (4) For the entire period plus the period of the auditors fi eldwork.