An operational audit is an example of a compliance audit. In other words, it is technically possible for auditors to find internal controls over financial reporting to be weak, but conclude through substantive tests that the weaknesses did not cause the financial statements to be materially misrepresented. D high likelihood that material misstatements will not be prevented or detected by internal control. A clerk reorders 250 items when the inventory falls below 25 items. Control risk is the likelihood that the control structure is flawed because internal controls are either absent or inadequate to prevent or detect errors in the accounts. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Which of the following is not an example of a general authorization? External auditors can cooperate with and use evidence gathered by internal audit departments that are organizationally independent and that report to the Audit Committee of the Board of Directors. B determining if fraud has occurred. The S field is 1 bit in size, if this is set it signifies that the current label is the last in a stack. Correct answer: d Learning Objective 1. C A firm's income statement will never show a positive profit when its cash outflows exceed its cash inflows.
Which of the following indicates a strong internal control environment? C verifying accounting information for external users. Facilitate business and private ordering. Answer: The roles of all four types of auditors are similar in that they involve the accumulation and evaluation of evidence about information to ascertain and report on the degree of correspondence between the information and established criteria. In addition to understanding accounting, the auditor must possess expertise in the accumulation and interpretation of audit evidence. B all public companies to define adequate internal controls.
To attest to the validity of these assertions, auditors are required to test the controls. C Rely on the work on internal auditors in order to promote audit efficiency. True False Correct answer: b Learning Objective 1. Suppliers as a user of the financial statements would least consider which of the following aspects of the financial statements: a. C a deficiency of management. How do internal controls and detection risk fit in? B 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. SysTrust provides assurance to management, the board of directors or third parties about the reliability of information systems used to generate real-time information.
Evaluate financial statements that are to be submitted to a bank. Answer: Remoteness — As most users do not have access to the entity under review, this makes it difficult to determine whether the information contained in the report is a fair presentation of the entity and its activities for the relevant period. The largest accounting firms in Australia are known collectively as the a. List the four broad objectives of the internal control system. D the policies and procedures may be so weak that no reliance is contemplated by the auditor. Which sections are the focus of this chapter? C Written communication is required.
B a deficiency in design of internal controls. Identify the general that support the application controls. D High turnover of accounting, internal audit, and information technology staff. The concept of reasonable assurance suggests that a. Correct answer: d Learning Objective 1.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C Neither service provides assurance on financial statements. D provide a method for safeguarding assets, checking the accuracy and reliability of accounting data, promoting operational efficiency, and encouraging adherence to prescribed managerial policies. C reviews, verifications, and attestations regarding internal controls. D operate in stable economic environments. Assess risks and threats to an audit of financial statements through analytical and critical thinking. C make recommendations for improving performance.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. . Governments may be subject to the same pressures that led to accounting scandals like Enron. A profits are only accounting measures B cash flows are more representative of financial strength C profit maximization does not consider risk D profits today are less desirable than profits earned in future years Which of the following is true of cash flows and risk? List the four basic types of audit evidence. They are not application specific. Large companies that have some form of international business c. We do not sell the textbook.
C likelihood that material misstatements will not be prevented or detected by internal control. Communicate effectively in writing and verbally. B transactions are executed in accordance with management's authorization. A senior management emphasizes that it is very important to beat analyst estimates of earnings every reporting period B senior management emphasizes that budgeted amounts for expenses are to be achieved for each reporting period or explained in the variance analysis report C senior management emphasizes that job rotation is a worthwhile corporate objective D senior management emphasizes that job evaluations are based on performance 10 Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud. D not constitute a deficiency.