Chapter 7:Internal Control 1. Because of the Inherent inconsistency of automated controls, auditors will test them at various times in the year to determine their operating effectiveness. 1. True 2. False 2.A correct response by management to an assessment of risk could include taking no action because the risk is consistent with the risk tolerance of the organization 1. True 2. False 3.A primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with 1. Knowledge necessary to assess the risks of material misstatements 2. A basis for modifying tests of controls 3. Evidence to use to assess inherent risk 4. An evaluation of the consistency of application of management's policies 4 An example of a corrective control would be to maintain backup copies of key transactions and master files in case of data entry errors. 1. True 2. False 5 All of the following are considered to be factors indicating increased financial reporting risk except: 1. Changes in technology affecting production processes or information system 2. Employees who have been with the company for many years 3. Expansion or acquisition of foreign operations 4. Corporate restructurings