The design or operation of a control may not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. According to AUC 265, this circumstance is a

a. Material weakness.

b. Significant deficiency.

c. Control deficiency.

d. Critical deficiency.

The auditor should document the understanding of internal control. For example, a narrative memorandum may be used to

a. Ask a series of interrelated questions about internal control

b. Provide written description of the process and flow of documents and of the control points

c. Identify the contingencies considered in the description of a problem and the appropriate actions to be taken relatives to those contingencies.

d. Represent the specific steps in a program and the order in which they will be carried out

Which of the following statements best describes an auditor's responsibility to detect errors and fraud?

a. An auditor has no responsibility to detect errors and fraud because an auditor is not an insurer and an audit does not constitute a guarantee.

b. An auditor has no responsibility to detect errors and fraud unless analytical procedures or tests of transactions identify conditions causing a reasonably prudent auditor to suspect that the financial statements were materially misstated.

c. An auditor is responsible to detect material errors, but has no responsibility to detect fraud that is concealed through employee collusion or management override of internal control.

d. An auditor should design an audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements

Because of the risk of material misstatement due to fraud an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

a. Professional skepticism

b. Independent integrity

c. Objective judgement

d. Impartial conservatism