UC Audit Exam #2 Questions And Answers Pass Guaranteed

The overall attitude and awareness of those charged with governance (i.e., the entity's board of directors) concerning the importance of internal control usually is reflected in its: a. Safeguards over access to assets b. Computer-based controls c. Control environment d. System of segregation of duties - correct answers Control Environment If internal control is properly designed, the same employee may be permitted to a. Receive and deposit checks and also approve write-offs of customer accounts. b. Approve vouchers for payment and also sign checks. c. Reconcile the bank statements and also receive and deposit cash. d. Sign checks and also cancel supporting documents. - correct answers Sign checks and also cancel supporting documents. Although substantive procedures may support the accuracy of underlying records, these tests frequently provide no affirmative evidence of segregation of duties because a. Substantive procedures rarely guarantee the accuracy of the records if only a sample of the transactions has been tested. b. The records may be accurate even though they are maintained by a person who performs incompatible functions. c. Substantive procedures relate to the entire period under audit, but test of controls ordinarily are confined to the period during which the auditor is on the client's premises. d. Many computerized procedures leave no audit trail of who performed them, so substantive procedures may necessarily be limited to inquiries and observation of office personnel. - correct answers The records may be accurate even though they are maintained by a person who performs incompatible functions. In obtaining an understanding of internal control, the auditor may trace several transactions through the control process, including how the transactions interface with any service organizations whose services are part of the information system. The primary purpose of this task is to a. Replace substantive procedures. b. Determine whether the controls have been implemented. c. Determine the effectiveness of the control procedures. d. Detect fraud. - correct answers Determine whether the controls have been implemented. The Sarbanes-Oxley Act of 2002 requires that annual reports of public companies include (1) a statement of management's responsibility for establishing and maintaining adequate internal control and procedures for financial reporting and (2) management's assessment of their effectiveness. The role of the registered auditor in this process is to a. Disclaim an opinion on the assessment of controls. b. Report clients with unsatisfactory internal control to the SEC. c. Express an opinion on whether the client is subject to the Securities Exchange Act of 1934. d. Express an opinion on the effectiveness of internal control over financial reporting. - correct answers Express an opinion on the effectiveness of internal control over financial reporting. Which of the following is a true statement about an auditor's responsibility regarding consideration of fraud in a financial statement audit? a. The auditor should consider the client's internal control and plan and perform the audit to provide absolute assurance of detecting all material misstatements.