1.During an audit of a private company's financial statements, an auditor should perform tests of controls to obtain sufficient appropriate audit evidence about the operating effectiveness of relevant controls if

The auditor does not presume that client management has committed fraud. More financial documentation is available through tests of controls. Substantive procedures alone cannot provide sufficient appropriate audit evidence. The auditor does not intend to rely on the operating effectiveness of controls. 2. Which of the following is a complete and accurate list of the walkthrough procedures usually performed in an issuer's integrated audit?

Inquiry, observation, analytical procedures, testing of controls. Inquiry, sampling, analytical procedures, testing of controls. Inquiry, observation, inspection of relevant documentation, reperformance of controls. Inquiry, inspection of relevant documentation, sampling, reperformance of controls 3. Which of the following describes a weakness in accounts payable procedures? 1 point The accounts payable clerk files invoices and supporting documentation after payment. The accounts payable clerk manually verifies arithmetic on the vendor invoice. The accounts payable system compares the receiving report to the vendor invoice. The accounts payable manager issues purchase orders. 4. Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities? 1 point An independent trust company that has no direct contact with the employees who have record keeping responsibilities has possession of the securities. The internal auditor verifies the marketable securities in the entitys safe each year on the balance sheet date. The independent auditor traces all purchases and sales of marketable securities through the subsidiary ledgers to the general ledger. A designated member of the board of directors controls the securities in a bank safe deposit box 5. Which of the following is a computer program that appears to be legitimate but performs some illicit activity when it is run? 1 point Hoax virus. Web crawler. Trojan horse. Killer application. 6. An auditor is auditing a mutual fund company that uses a transfer agent to handle accounting for shareholders. Which of the following actions by the auditor would be most efficient for obtaining information about the transfer agent's internal controls? 1 point Review reports on internal control placed in operation and its operating effectiveness produced by the agent's own auditor. Review prior-year workpapers to determine whether the number of transactions processed by the agent has materially increased. Perform an audit on the internal control function of the agent. Perform tests of controls on a sample of the audited firm's transactions through the agent. 7. An entity has the following invoices in a batch: Invoice # Product Quantity Unit Price 201 F10 150 $5.00 202 G15 200 $10.00 203 H20 250 $25.00 204 K35 300 $50.00 Which of the following most likely represents a financial total? 1 point 900 4 70 18000 24000 8. If a service auditor is unable to obtain a written assertion from the service organization's management regarding its system and the suitability of the design and operating effectiveness of controls, it would be most appropriate for the auditor to 1 point Increase the substantive testing of the service organization's controls. Withdraw from the engagement unless prohibited by law. Assess a higher level of detection risk for the engagement. Report management's action in the auditor's communication to those charged with governance 9.When assessing control risk at below the maximum level, an auditor is required to document the auditor's understanding of the entity's Control activities that help ensure management directives are carried out 1 point yes No Other: 10.When assessing control risk at below the maximum level, an auditor is required to document the auditor's understanding of the entity's Control environment factors that help the auditor plan the engagement 1 point yes No Other: 11. Which of the following is most likely not a reason to perform tests of controls? 1 point Risk of material misstatement is assessed at a lower level. Performing tests of controls will be more efficient than performing substantive testing. The auditor believes weaknesses exist in the internal control design. The auditor believes the internal controls can be relied on 12. What are the reasons for tests of control? [multiple answers may apply which means more than 1 or 2 answers] 6 points To lower the assessed risk of material misstatement More efficient than substantive testing To reduce the amount of substantive testing Substantive tests cannot provide audit evidence Controls appear to be reliable Controls are well designed Relevant to management assertions Required for all public non public audits 13. Which of the following statements concerning control risk is correct? 1 point The auditor may obtain an understanding of an entity's internal control structure and assess control risk concurrently. The auditor may assess control risk at the maximum level without indicating the basis for that assessment. The auditor may assess control risk sufficiently low to eliminate substantive testing for significant transaction classes. The auditor may not consider evidence of control procedures obtained in prior period audits when assessing control risk in the current period. 14. Which of the following outcomes is a likely benefit of information technology used for internal control? 1 point Processing of unusual or nonrecurring transactions. Enhanced timeliness of information. Potential loss of data. Recording of unauthorized transactions 15. Which of the following factors would least likely affect the extent of the auditor's consideration of the client's internal controls? 1 point The amount of time budgeted to complete the engagement. The size and complexity of the client. The nature of specific relevant controls. The auditor's prior experience with client operations. 16. What are the internal control considerations considered by the auditor?[ multiple answers may apply] 5 points Entity size and complexity Relevance of control to financial reporting Likelihood the control will reduce or prevent material misstatement Nature of specific controls (ie, automated versus human control) Prior audit experience with client Tone at the top 17. Is risk assessment a component of internal control? 1 point yes No maybe Other: 18. Is segregation of duty a component of internal control? 1 point yes No maybe Other: 19. Which of the following procedures will most likely provide evidence regarding the completeness of the amount recorded as investments in securities on the balance sheet? 1 point Inspecting securities on hand. Reading financial statement disclosures. Testing subsequent transactions for evidence of settlement. Confirming loans to determine if securities are pledged as collateral. 20. Evidence of investment reconciled to recorded amounts will confirm completeness of investment securities? 1 point Yes No Maybe 21. Management verifies investments registered in the name of the entity will confirm rights and obligations of investment securities? 1 point Yes No Maybe 22. The recorded values compared with current market prices will confirm allocation and valuation of investment securities? 1 point Yes No Maybe 23. Entity maintains evidence of investments that can be confirmed will confirm existence of investment securities? 1 point Yes No Maybe 24. Which of the following payroll control activities would most effectively ensure that payment is made only for work performed? 1 point Require all employees to record arrival and departure by using the time clock. Have a payroll clerk recalculate all time cards. Require all employees to sign their time cards. Require employees to have their direct supervisors approve their time cards 25. An increase in the assessed level of control risk will increase * 1 point Test of control Substantive testing Inherent risk Detection testing 26. Which of the following best describes why an auditor is always required to document the auditors understanding of internal controls? 1 point To support the auditor's opinion. To avoid performing substantive procedures. To lower control risk. To document the basis for risk assessment. 27. Which of the following would be a potential control deficiency because of a lack of segregation of duties? 1 point An employee is responsible for maintaining the accounts receivable balance and the accounts payable subsidiary ledger. An employee who reconciles cash bank accounts also reconciles the accounts receivable subsidiary ledger to the control account in the general ledger. An employee who is responsible for ordering equipment is also responsible for inspecting it when it arrives and releasing it to the shop floor. An employee who is responsible for receiving raw materials is also responsible for releasing it to the factory as authorized requisitions are received