26.Which of the following is not one of the inherent limitations of internal control?

Faulty human judgment.

Collusion.

Management override.

Lack of proper segregation of incompatible duties.

27.PSAs require the auditor to obtain understanding of the entity's internal control structure

Sufficient to find any frauds that may exist.

For first time audit clients.

Whenever the auditor wishes or sees necessary.

For every audit.

28. Questionnaires consist of a series of interrelated questions about internal control policies and procedures. The questions are typically phrased so that a "Yes" indicates a control strength and a "No" indicates a potential weakness. An advantage(s) of the questionnaire is(are)

Help identify control concerns and prevents the auditor from overlooking important control considerations.

Flexible to prepare, although difficult for a complex system.

Identify the contingencies considered in the description of a problem and the appropriate actions to be taken in each case.

Provide a visual representation of the system and flexible in construction.

29.Physical controls to safeguard assets would include:

segregation of duties

safety audits on the production-line

hiring only trustworthy cashiers

locks on the warehouse doors

30.If the auditor finds a material weakness in the controls of the client, it represents a deficiency in the design or operation of a control

Group of answer choices

that results in a remote possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected.

that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected.

that adversely affects the company's ability to initiate, record, process, or report external financial data reliably in accordance with GAAP.

that negatively affects the company's ability to initiate, record, process, or report external financial data reliably in accordance with GAAP.

31 pts

Which of the following risk assessments or values is least likely to be characteristic of a small business audit?

Group of answer choices

Business risk is low.

Detection risk is low.

Inherent risk is low

Control risk is low.

32

Auditing standards _____ that the basis used to determine the preliminary judgment about materiality be documented in the audit files.

Group of answer choices

Permit

Require

Strongly encourage

Do not allow

33

Which of the following statements is incorrect relating to evaluating misstatements and findings identified by the auditor?

Group of answer choices

The auditor should consider the aggregate effects of misstatements not corrected by the entity.

The auditor should consider misstatements that are clearly trivial.

The auditor should consider the likely misstatements, not only known misstatements.

The auditor should consider the individual effects of misstatements not corrected by the entity.

34

Monitoring

Group of answer choices

Sets the tone of an organization, influencing the control consciousness of its people.

Is the entity's identification and analysis of relevant risks as a basis for their management.

Is a process that assesses the quality of internal control performance over time.

Support the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities.

35

Which of the following is not a medium that can normally be used by an auditor to record information concerning a client's internal control policies and procedures?

Group of answer choices

Policy manual

Questionnaire.

Check list

Decision table

36

Risk assessment procedures performed to obtain evidence about the design and implementation of relevant controls include

Group of answer choices

Recalculation.

External confirmation.

Analytical procedures.

Tracing transactions or walkthrough.

37

Inquiries directed towards internal audit personnel may most likely

Group of answer choices

Help the auditor in understanding the environment in which the financial statements are prepared

Relate to their activities concerning the design and effectiveness of the entity's internal control and whether management has satisfactorily responded to any findings from those activities

Help the auditor in evaluating the appropriateness of the selection and application of accounting policies

Relate to changes in the entity's marketing strategies, sales trends or contractual arrangements with its customers

Control environment component of internal control

Group of answer choices

Includes the governance and management functions and the attitudes, awareness, and actions of those charged with governance and management concerning the entity's internal control and its importance in the entity.

Consists of the procedures and records established to initiate, authorize, record, process, and report entity transactions, events and conditions and to maintain accountability for the related assets, liabilities, and equity.

Consists of the policies and procedures that help ensure that management directives are carried out.

Is the entity's process for identifying business risks relevant to financial reporting objectives and deciding about actions to address those risks, and the results thereof.

39

Among the three objectives of internal control, which is of most importance to the auditor in an audit of financial statements?

Group of answer choices

Compliance with applicable laws and regulations.

All of the above.

Effectiveness and efficiency of operations.

Reliability of financial reporting