20. All of the following are control deficiencies except:

a. Absence of appropriate reviews of transactions. b. fixed assets are financed with long-term debt. c. Inadequate documentation of the components of internal control.

d. The absence of an internal process to report deficiencies in internal control to management on a timely basis. e. All of the above represent control deficiencies. f. None of the above represent control deficiencies.

21. A CPA auditing an electric utility wishes to determine whether all customers are being billed. The CPA's best direction of test is from the

a. Meter department records to the billing (sales) register. b. Billing (sales) register to the meter department records. c. Accounts receivable ledger to the billing (sales) register. d. Billing (sales) register to the accounts receivable ledger.

22. Which of the following statements is correct regarding internal control?

a. A well-designed internal control environment ensures the achievement of an entitys control objectives. b. An inherent limitation to internal control is the fact that controls can be circumvented by management override. c. A well-designed and well-operated internal control environment should detect collusion perpetrated by two people.

d. Internal control is a necessary business function and should be designed and operated to detect all errors and fraud.

23. Which of the following procedures is considered a test of controls?

a. An auditor reviews the entitys check register for unrecorded liabilities.

b. An auditor evaluates whether a general journal entry was recorded in the proper amount.

c. An auditor interviews and observes appropriate personal to determine segregation of duties.

d. An auditor reviews the audit workpapers to ensure proper sign-off.

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