41.As part of understanding internal controls, an auditor is not required to

Group of answer choices

ascertain whether internal control policies and procedures have been placed in operation.

obtain knowledge about the operating effectiveness of internal control.

consider factors that affect the risk of material misstatement.

identify the types of potential misstatements that may occur.

42.The Philippine Standards on Auditing require the auditor to obtain an understanding of the client's internal controls

Group of answer choices

whenever it would be appropriate.

for first-time audits.

for every audit.

sufficient to find any frauds which may exist.

43.Corporate directors, management, external auditors, and internal auditors all play important roles in creating a proper control environment. Top management is primarily responsible for

Group of answer choices

establishing a proper environment and specifying overall internal control.

implementing and monitoring controls that are designed by the board of directors.

reviewing the reliability and integrity of financial information and the means used to collect and report such information.

ensuring that external and internal auditors adequately monitor the control environment.

44.A system of internal control, regardless of how carefully designed and implemented, contains certain inherent limitations. Which of the following errors or irregularities is not caused by an inherent limitation?

Group of answer choices

A computer programmer and a computer operator conspired to divert funds from the company to an account controlled by the dishonest employees.

The president and chief executive officer, with the assistance of the corporate controller, inflated earnings by recording fictitious sales at year-end.

Numerous recording errors occurred because persons analyzing and recording transactions did not have the necessary accounting background.

A newly-installed electronic data processing system failed to provide for a comparison of sales order amount with prior customer balance and credit limit. This resulted in numerous sales to customers who had already exceeded their credit limits.

45.The auditor who becomes aware of reportable conditions is required to communicate such a weakness to the

Group of answer choices

senior management and board of directors.

audit committee and client's legal counsel.

internal auditors and senior management.

board of directors and internal directors.

46.Which of the following is not a factor affecting the independent auditor's judgment about the quantity, type, and content of audit working papers?

Group of answer choices

The need for supervision and review of the work performed by assistants.

The type of financial statements, schedules, or other information on which the auditor is reporting.

The nature and condition of the client's records and internal controls.

The expertise of the client personnel and their participation in preparing the schedules.

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47.Which of the following factors most likely affects the auditor's judgment about the quantity, type, and content of working papers?

Group of answer choices

The content of the client's representation letter

The timing of substantive tests completed prior to the balance sheet date

The assessed level of control risk

The usefulness of the working papers as a reference source for the client

48."Evaluations of financial information made by a study of plausible relationships among financial and nonfinancial data involving comparisons of recorded amounts to expectations developed by the auditor" refers to:

Group of answer choices

analytical procedures.

tests of transactions.

auditing.

tests of balances.

49.Analytical procedures used in planning an audit should focus on

Group of answer choices

identifying material weaknesses in internal control.

evaluating the adequacy of evidence gathered concerning unusual balances.

enhancing the auditor's understanding of the client's business.

testing individual account balances that depend on accounting estimates.

50.Each of the following might, by itself, form a valid basis for an auditor of deciding to omit a test except for the:

Group of answer choices

Relationship between the cost of obtaining evidence and its usefulness

Assessment of control risk at a low level

Inherent risk involved

Difficulty and expense involved in testing a particular item