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ACC 403 Final Assessment Comprehensive Auditing and Internal Control Exam

Final assessment covering auditing and internal control concepts.

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    ACC 403 Final Assessment Comprehensive Auditing and Internal Control Exam Question 1 When taken together, the concepts of risk and materiality in auditing: Answer measure the uncertainty of amounts of a given magnitude. measure uncertainty only. measure magnitude only. measure inherent risk. Question 2 Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documented in the audit files. Answer permit do not allow require strongly encourage Question 3 Auditors are ________ to document the known and likely misstatements in the financial statements under audit. Answer permitted required not allowed strongly encouraged Question 4 ________ misstatements are those where the auditor can determine the amo unt of the misstatement in the account. Answer Potential Likely Known Projected Question 5 Inherent risk is ________ related to detection risk and ________ related to the amount of audit evidence. Answer directly, inversely directly, directly inversely, inversely

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    inversely, directly Question 6 Management must disclose material weaknesses in internal control in its audit report: Answer whenever the weakness is deemed significant to a single class of transactions. whenever the weakness is significant to overall financial reporting objectives. if the weakness exists at the end of the year. only if the auditor identifies the weakness as significant. Question 7 Which of the following deficiency exists if a necessary control is missing or not properly formulated? Answer C ontrol Significant Design Operating Question 8 An act of two or more employees to steal assets and cover their theft by misstating the accounting records would be referred to as: Answer collusion. a material weakness. a control deficiency. a significant deficiency Question 9 Sarbanes - Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements? Answer A statement that management is responsible for establishing and mai ntaining an adequate internal control structure and procedures for financial reporting A statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting A statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting A statement that the external auditors are solely responsible Question 10 Which of the following components of the control environment define the existing lines of responsibility and authority? Answer

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    Organizational structure Management philosophy and operating style Human resource policies and practices Management integrity and ethical values Question 11 Which of the following would the auditor be most concerned about regarding a heightened risk of intentional misstatement? Answer Senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period. Senior management emphasizes that budgeted amounts for expenses are to be achieved for each reporting period or explained in the variance analysis report. Senior management emphasizes that job rotation is a worthwhile corporate objective. Senior management emphasizes that job evaluations are based on performance. Question 12 Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings. Answer income smoothing cookie jar reserves cash sales Question 13 Company management is often under pressure to increase revenue and/or net income. One approach is to use a "bill and hold" arrangement. This is an example of which of the following? Answer Significant accounting estimates Fictitious revenue recorded Premature revenue recognized Alteration of cutoff documents Question 14 Who is most likely to perpetrate fraudulent financial reporting? Answer Members of the board of directors Production employees Management of the company The internal auditors Question 15 Fraud awareness training should be: Answer

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    broad and all - encompassing. extensive and include details for all functional areas. specifically related to the employee's job responsibility. focused on employees understanding the importance of ethics. Question 16 Controls which are designed to assure that the information processed by the computer is authorized, complete, and accurate are called: Answer input controls. processing controls. output controls. general controls. Question 17 The approach to auditing where the auditor does not test automated con trols to reduce assessed control risk is called: Answer the single - stage audit. the test deck approach. auditing around the computer. generalized audit software (GAS). Question 18 A ________ is responsible for controlling the use of computer programs, transaction files and other computer records and documentation and releases them to the operators only when authorized. Answer software engineer chief computer operator librarian data control operator Question 19 A ________ total represents the summary total o f codes from all records in a batch that do not represent a meaningful total. Answer record hash output financial Question 20 One of the unique risks of protecting hardware and data is: Answer

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