Question
Which of the following is false regarding tests of controls? Some nonpublic companies are unwilling to implement ideal internal control systems because of cost. A
Which of the following is false regarding tests of controls?
| Some nonpublic companies are unwilling to implement ideal internal control systems because of cost. | |
| A company's size has a significant effect on the nature of internal control and the specific controls that are implemented. | |
| Walk-throughs can be performed instead of tests of controls. | |
| Auditing standards require the auditor to obtain a sufficient understanding of internal control to assess control risk. |
Which of the following is false regarding audit risk?
| Inherent risk is the risk that audit evidence for an audit objective will fail to detect misstatements exceeding performance materiality. | |
| Acceptable audit risk is a measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualfied opinion has been issued. | |
| Auditing standards require the auditor to assess the risk of material misstatements in the client's financial statements. | |
| The audit risk model helps auditors decide how much and what types of evidence to accumulate for each relevant audit objective. |
Which of the following is false regarding auditing in an IT environment?
| Auditors commonly do parallel simulation testing using generalized audit software. | |
| In networks, application software and data files used to process transactions are on one computer that other computers link to. | |
| A public companys use of desktop computers in the financial reporting process may affect the audit of internal control over financial reporting. | |
| Auditors in smaller companies often audit around the computer when general controls are less effective than in more complex IT environments. |
Which of the following is false regarding application controls?
| Processing controls are not meant to prevent and detect errors while transaction data are processed. | |
| The most important output control is review of the data for reasonableness by someone knowledgeable about the output. | |
| Application controls may be done by computers or client personnel. | |
| Input controls are designed to ensure that the information entered into the computer is authorized, accurate, and complete. |
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