Test of controls are concerned primarily with each of the following questions, except By whom where the controls are applied Were the necessary controls consistently performed How were the controls applied Why were the controls applied Controls should be assessed in terms of Specific control procedures Types of potential fraud Financial statement assertion Control environment factors The following statement relate to the use of audit evidence when testing the operating effectiveness of relevant controls Which is false An auditor who obtains sufficient appropriate audit evidence about the operating effectiveness of controls during the interim period should no longer obtain additional evidence of operating effectiveness for the remaining period An auditor may plan to use audit evidence about the operating effectiveness of controls obtained in prior audit If an auditor plans to rely on controls that have changed since they were last tested, the auditor should test the operating effectiveness of such controls in the current audit Audit evidence pertaining only to a point in time maybe sufficient for the auditor purpose for example, when testing control over an entity physical count of inventories at year end After gaining an understanding of internal control and assessing the risk of material misstatement, auditor decided to perform test of controls The auditor most likely decided that Additional evidence to support a further reduction in control risk is not available It is not possible or practicable to reduce the risk of material misstatement at the assertion level to an acceptably low level with audit evidence obtained only from substantive audit procedures There were many internal control weaknesses that could allow misstatement to enter the accounting system An increased in the assessed level of control risk is justified for certain financial statement assertion An auditor may decide to assess control risk at the maximum level for certain assertions because the auditor believes Controls are unlikely to pertain to the assertions The entitys control components are interrelated Sufficient appropriate audit evidence to support the assertions is likely to be available More emphasis on test of controls than substantive test is warranted Which of the following statements is correct concerning an auditor assessment of control risk Assessing control risk maybe performed concurrently during an audit with obtaining an understanding of the entity internal control Evidence about the operation of controls in prior audits may not be considered during the current year assessment of control risk The basis for an auditor conclusion about the assessed level of control risk need not be documented unless control risk is assessed at the maximum level The lower the assessed level of control risk, the less assurance the evidence must provide that the controls are operating effectively According to PSA 330, an auditor who plans to rely on controls that have not changed since they were last tested should be test the operating effectiveness of such controls at least once every Second audit b Third audit c Fourth audit d Fifth audit On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would Increase inherent risk c Decreased inherent risk Increase materiality level d Decreased detection risk When the auditor increased the planned assessed level of control risk because certain controls were determined to be ineffective the auditor would most likely increase the Extent of test of details c Extent of test of control Level of inherent risk d Level of detection risk Regardless of the assessed level of control risk, an auditor would perform some Test of controls to determine the effectiveness of internal control policies Analytical procedures to verify the design of internal control procedures Substantive test to restrict detection risk for significant transaction classes Dual purpose test to evaluate both the risk of monetary misstatement and preliminary control risk An auditor is least likely to test control that provide for Approval of the purchase and sale of trading securities Classification of revenue and expense transactions by product line Segregation of the functions of recording disbursement and reconciling the bank account Comparison of receiving report and vendors invoices with purchase orders When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs Test of controls and extensive test of property and equipment balances at the end of the year Analytical procedures for current year property and equipment transactions Test of controls and limited test of current year property and equipment transactions Analytical procedures for property and equipment balances at the end of the year Test of controls are least likely to be omitted with regard to Accounts believed to be subject to ineffective control Accounts representing few transactions Accounts representing many transactions Subsequent events Which of the following type of evidence would an auditor most likely examine to determine whether controls are operating as designed Confirmations of receivables verifying account balances Letter of representation corroborating inventory pricing Attorneys responses to the auditor inquiries Client records documenting the use of computer programs An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise, which of the following procedures provides the greatest assurance that this control is operating effectively Select and examine receiving reports and ascertain that the related cancelled checks are dated no earlier than the receiving reports Select and examine receiving reports and ascertain that the related cancelled checks are dated no later than the receiving reports Select and examine cancelled checks and ascertain that the related receiving report are dated no earlier than the checks Select and examine cancelled checks and ascertain that the related receiving reports are dated no later than the checks Based on observations made during an audit, the independent auditor should discuss with management the effectiveness of the company controls that protect against the purchase of Required supplies provided by a vendor who offers no trade discount Required supplies provided by a vendor who offers no cash discount Inventory items acquired based on an economic order quantity inventory management concept Supplies individually ordered without considering possible volume discount In assessing control risk for the purchasing cycle, the auditor would be least influence by The effectiveness of controls in other cycles The existence within the purchasing cycle of internal control strengths that offset weaknesses The audit work performed in the purchasing cycle by the company internal auditor The availability of a company manual describing policies and procedures for the purchasing cycle An auditor uses the knowledge provided by the understanding of internal control and the final assessed level of control risk primarily to determine the nature, extent and timing of Attribute test c Test of control Compliance test d Substantive test Which of the following test of controls most likely would help assure an auditor that goods shipped are properly billed Scan the sales journal for sequential and unusual entries Examines shipping documents for matching sales invoices Compare the accounts receivable ledger to daily sales summaries Inspect unusual sale invoices for consecutive pre numbering An auditor intends to perform test of control on a client cash disbursement procedures If the control procedures leave no audit trail of documentary evidence the auditor most likely test the procedures by Inquiry and analytical procedures Inquiry and observation Analytical procedure and confirmation Confirmation and observation

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 17, 2024

Test of controls are concerned primarily with each of the following questions, except By whom where the controls are applied Were the necessary controls consistently

Test of controls are concerned primarily with each of the following questions, except
1. By whom where the controls are applied
2. Were the necessary controls consistently performed
3. How were the controls applied
4. Why were the controls applied

Controls should be assessed in terms of
1. Specific control procedures
2. Types of potential fraud
3. Financial statement assertion
4. Control environment factors

The following statement relate to the use of audit evidence when testing the operating effectiveness of relevant controls. Which is false
1. An auditor who obtains sufficient appropriate audit evidence about the operating effectiveness of controls during the interim period should no longer obtain additional evidence of operating effectiveness for the remaining period
2. An auditor may plan to use audit evidence about the operating effectiveness of controls obtained in prior audit
3. If an auditor plans to rely on controls that have changed since they were last tested, the auditor should test the operating effectiveness of such controls in the current audit
4. Audit evidence pertaining only to a point in time maybe sufficient for the auditor purpose for example, when testing control over an entity physical count of inventories at year end

After gaining an understanding of internal control and assessing the risk of material misstatement, auditor decided to perform test of controls. The auditor most likely decided that
1. Additional evidence to support a further reduction in control risk is not available
2. It is not possible or practicable to reduce the risk of material misstatement at the assertion level to an acceptably low level with audit evidence obtained only from substantive audit procedures
3. There were many internal control weaknesses that could allow misstatement to enter the accounting system
4. An increased in the assessed level of control risk is justified for certain financial statement assertion

An auditor may decide to assess control risk at the maximum level for certain assertions because the auditor believes
1. Controls are unlikely to pertain to the assertions
2. The entitys control components are interrelated
3. Sufficient appropriate audit evidence to support the assertions is likely to be available
4. More emphasis on test of controls than substantive test is warranted

Which of the following statements is correct concerning an auditor assessment of control risk
1. Assessing control risk maybe performed concurrently during an audit with obtaining an understanding of the entity internal control
2. Evidence about the operation of controls in prior audits may not be considered during the current year assessment of control risk
3. The basis for an auditor conclusion about the assessed level of control risk need not be documented unless control risk is assessed at the maximum level
4. The lower the assessed level of control risk, the less assurance the evidence must provide that the controls are operating effectively

According to PSA 330, an auditor who plans to rely on controls that have not changed since they were last tested should be test the operating effectiveness of such controls at least once every
1. Second audit b. Third audit c. Fourth audit d. Fifth audit

On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would
1. Increase inherent risk c. Decreased inherent risk
2. Increase materiality level d. Decreased detection risk

When the auditor increased the planned assessed level of control risk because certain controls were determined to be ineffective the auditor would most likely increase the
1. Extent of test of details c. Extent of test of control
2. Level of inherent risk d. Level of detection risk

Regardless of the assessed level of control risk, an auditor would perform some
1. Test of controls to determine the effectiveness of internal control policies
2. Analytical procedures to verify the design of internal control procedures
3. Substantive test to restrict detection risk for significant transaction classes
4. Dual purpose test to evaluate both the risk of monetary misstatement and preliminary control risk

An auditor is least likely to test control that provide for
1. Approval of the purchase and sale of trading securities
2. Classification of revenue and expense transactions by product line
3. Segregation of the functions of recording disbursement and reconciling the bank account
4. Comparison of receiving report and vendors invoices with purchase orders

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs
1. Test of controls and extensive test of property and equipment balances at the end of the year
2. Analytical procedures for current year property and equipment transactions
3. Test of controls and limited test of current year property and equipment transactions
4. Analytical procedures for property and equipment balances at the end of the year

Test of controls are least likely to be omitted with regard to
1. Accounts believed to be subject to ineffective control
2. Accounts representing few transactions
3. Accounts representing many transactions
4. Subsequent events

Which of the following type of evidence would an auditor most likely examine to determine whether controls are operating as designed
1. Confirmations of receivables verifying account balances
2. Letter of representation corroborating inventory pricing
3. Attorneys responses to the auditor inquiries
4. Client records documenting the use of computer programs

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise, which of the following procedures provides the greatest assurance that this control is operating effectively
1. Select and examine receiving reports and ascertain that the related cancelled checks are dated no earlier than the receiving reports
2. Select and examine receiving reports and ascertain that the related cancelled checks are dated no later than the receiving reports
3. Select and examine cancelled checks and ascertain that the related receiving report are dated no earlier than the checks
4. Select and examine cancelled checks and ascertain that the related receiving reports are dated no later than the checks

Based on observations made during an audit, the independent auditor should discuss with management the effectiveness of the company controls that protect against the purchase of
1. Required supplies provided by a vendor who offers no trade discount
2. Required supplies provided by a vendor who offers no cash discount
3. Inventory items acquired based on an economic order quantity inventory management concept
4. Supplies individually ordered without considering possible volume discount

In assessing control risk for the purchasing cycle, the auditor would be least influence by
1. The effectiveness of controls in other cycles
2. The existence within the purchasing cycle of internal control strengths that offset weaknesses
3. The audit work performed in the purchasing cycle by the company internal auditor
4. The availability of a company manual describing policies and procedures for the purchasing cycle

An auditor uses the knowledge provided by the understanding of internal control and the final assessed level of control risk primarily to determine the nature, extent and timing of
1. Attribute test c. Test of control
2. Compliance test d. Substantive test

Which of the following test of controls most likely would help assure an auditor that goods shipped are properly billed
1. Scan the sales journal for sequential and unusual entries
2. Examines shipping documents for matching sales invoices
3. Compare the accounts receivable ledger to daily sales summaries
4. Inspect unusual sale invoices for consecutive pre-numbering

An auditor intends to perform test of control on a client cash disbursement procedures. If the control procedures leave no audit trail of documentary evidence the auditor most likely test the procedures by
1. Inquiry and analytical procedures
2. Inquiry and observation
3. Analytical procedure and confirmation
4. Confirmation and observation