ACCY 131 EXAM 2 UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
Question:
1. The basic concept of internal control that recognizes the
cost of international control should not exceed the
benefits expected to be derived is known as:
A) management Responsibility
B) limited liability
C) reasonable assurance
D) Management by exception
Answer:
Reasonable assurance
Question:
2. An entities control activities include all of the following,
except:
A) Performance reviews
B) External auditors test of controls
C) Information processing
D) Segregation of duties
Answer:
External auditors tests of controls
Question:
3. Auditors are most likely to gather audit evidence solely
using substantive procedures:
Answer:
If the implemented controls are assessed as ineffective
Question:
4. Proper segregation of functional responsibilities in an
effective system of internal control calls for separation of
the functions of:
Answer:
Authorization, recording, and custody
,Question:
5. The documentation of an auditor's understanding of
internal controls:
A) Must include flow charts
B) Can include any combination of narrative,
questionnaires, or flowcharts
C) must be exclusively in narrative, questionnaires, or
flow chart form
D) Is optional
Answer:
Can it include any combination of narratives, questionnaires or flow charts
Question:
6. To obtain evidential matter about control risk and auditor
selects from a variety of other procedures, including
Answer:
Inquiry
Question:
7. An entities internal controls are most relevant to the
auditor when the policies and procedures
Answer:
Affect the financial statement assertions
Question:
8. The concept of reasonable assurance in the context of an
entities internal control controls, recognizes that
Answer:
The cost of some controls may be too high to implement in relation to potential
benefits
Question:
9. A substantive differs from a reliance strategy in that a
substantive strategy includes
Answer:
Increased implementation of tests of details of transactions and balances
Question:
10. For certain controls, such as segregation of duties
documentary evidence may not exist. An auditor would
most likely test us procedures by
Answer:
Observation and inquiry
, Question:
11. An auto strategy that says the allowable detection risk as
high likely includes all of the following except:
A) Reduced testing of transactions
B) Heavy reliance on analytical procedures as substantive
procedures
C) Audit work only completed at year end
D) Interim testing
Answer:
Audit work only completed at your end
Question:
12. Significant deficiencies are matters that come to an
auditor's attention that should be communicated to an
entities audit committee because they represent
Answer:
Deficiencies in the design of controls or failures in the operation of internal
controls that merit the attention of those charge with governance
Question:
13. In order for an external auditor to complete an audit of a
public company, the entities management must comply
with all of the following, except:
A) Present an aura assessment of the effectiveness of the
entities internal control over financial reporting as of the
end of the entities's most recent fiscal year
B) Evaluate the effectiveness of the entities internal
control over financial reporting using suitable control
criteria
C) Support its evaluation with sufficient evidence,
including documentation
D) Except responsibility for the effectiveness of the
entities internal control over financial reporting
Answer:
Present an oral assessment of the effectiveness of the entity's internal control over
financial reporting as of the end of the entities most recent fiscal year
Question:
14. An integrated audit as stated in the section 404 of the
Sarbanes-Oxley act means:
Answer:
The auditor must conduct two audits, one of the effectiveness of internal control,
and one of the financial statements in an integrated way
AND CORRECT ANSWERS
Question:
1. The basic concept of internal control that recognizes the
cost of international control should not exceed the
benefits expected to be derived is known as:
A) management Responsibility
B) limited liability
C) reasonable assurance
D) Management by exception
Answer:
Reasonable assurance
Question:
2. An entities control activities include all of the following,
except:
A) Performance reviews
B) External auditors test of controls
C) Information processing
D) Segregation of duties
Answer:
External auditors tests of controls
Question:
3. Auditors are most likely to gather audit evidence solely
using substantive procedures:
Answer:
If the implemented controls are assessed as ineffective
Question:
4. Proper segregation of functional responsibilities in an
effective system of internal control calls for separation of
the functions of:
Answer:
Authorization, recording, and custody
,Question:
5. The documentation of an auditor's understanding of
internal controls:
A) Must include flow charts
B) Can include any combination of narrative,
questionnaires, or flowcharts
C) must be exclusively in narrative, questionnaires, or
flow chart form
D) Is optional
Answer:
Can it include any combination of narratives, questionnaires or flow charts
Question:
6. To obtain evidential matter about control risk and auditor
selects from a variety of other procedures, including
Answer:
Inquiry
Question:
7. An entities internal controls are most relevant to the
auditor when the policies and procedures
Answer:
Affect the financial statement assertions
Question:
8. The concept of reasonable assurance in the context of an
entities internal control controls, recognizes that
Answer:
The cost of some controls may be too high to implement in relation to potential
benefits
Question:
9. A substantive differs from a reliance strategy in that a
substantive strategy includes
Answer:
Increased implementation of tests of details of transactions and balances
Question:
10. For certain controls, such as segregation of duties
documentary evidence may not exist. An auditor would
most likely test us procedures by
Answer:
Observation and inquiry
, Question:
11. An auto strategy that says the allowable detection risk as
high likely includes all of the following except:
A) Reduced testing of transactions
B) Heavy reliance on analytical procedures as substantive
procedures
C) Audit work only completed at year end
D) Interim testing
Answer:
Audit work only completed at your end
Question:
12. Significant deficiencies are matters that come to an
auditor's attention that should be communicated to an
entities audit committee because they represent
Answer:
Deficiencies in the design of controls or failures in the operation of internal
controls that merit the attention of those charge with governance
Question:
13. In order for an external auditor to complete an audit of a
public company, the entities management must comply
with all of the following, except:
A) Present an aura assessment of the effectiveness of the
entities internal control over financial reporting as of the
end of the entities's most recent fiscal year
B) Evaluate the effectiveness of the entities internal
control over financial reporting using suitable control
criteria
C) Support its evaluation with sufficient evidence,
including documentation
D) Except responsibility for the effectiveness of the
entities internal control over financial reporting
Answer:
Present an oral assessment of the effectiveness of the entity's internal control over
financial reporting as of the end of the entities most recent fiscal year
Question:
14. An integrated audit as stated in the section 404 of the
Sarbanes-Oxley act means:
Answer:
The auditor must conduct two audits, one of the effectiveness of internal control,
and one of the financial statements in an integrated way
