Question 18

Which of these is not one of the 3 steps in Managements Evaluation of Internal Controls over Financial Reporting?

a. Engage a consulting firm to document the company's internal controls.

b. Provide a report on the effectiveness of internal control over financial reporting.

c. Identify financial reporting risks and controls implemented to mitigate those risks.

d. Evaluate the operating effectiveness of internal control over financial reporting.

Question 19

Auditors following a framework for professional decision making will at times encounter decisions that have ethical considerations. The textbook provided a widely accepted framework for ethical decision making. Which of these was not in that framework?

a. Identify the ethical issue.

b. Develop alternative courses of action.

c. Determine the affected parties and their rights.

d. Determine the likely consequences of each proposed course of action.

e. Obtain the services of an arbitrator to decide on the appropriate course of action.

f. Decide on the appropriate course of action.

Question 20

The organization evaluates and communicates internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors as appropriate. This is a principle that describes which of the COSO Components of Internal Controls.

a. Monitoring

b. Information and Communication

c. Control Activities

d. Risk Assessment

e. Control Environment

Question 21

A control activity that is designed to protect against the risk that an individual could both perpetrate and cover-up a fraud.

a. Input controls.

b. Physical control over assets.

c. Output controls.

d. Segregation of duties.

Question 22

One of the most fundamental and consistent findings in fraud research is that there must be some opportunity for fraud to be committed. One of the most significant opportunities to commit fraud is:

a. Weak or non-existent internal controls.

b. Pressure on management to produce improved earnings.

c. The rationalization that everybody cheats.

d. Empowerment of employees to make decisions.

Question 23

Information used by the auditor in arriving at the conclusions on which the auditors opinion is based.

a. Audit documentation.

b. Audit program.

c. Audit evidence.

d. Audit plan.

Question 24

If the auditor assesses the effectiveness of internal control to be effective, what effect does that have on the Extent/Nature of substantive procedures needed?

a. Less extent/less rigorous nature.

b. Greater extent/less rigorous nature.

c. Greater extent/greater rigorous nature.

d. Less extent/greater rigorous nature.