ACC 480 Chapter 7 Exam Questions With 100% Correct Answers.

ACC 480 Chapter 7 Exam Questions With 100% Correct Answers. All companies must follow the Sarbanes-Oxley Act requirements. - answerFalse Most public companies must follow Sarbanes-Oxley requirements. - answerTrue In a public company, management must assess and report on internal control over financial reporting. - answerTrue In a public company, management's report on internal control must be signed by the members of the audit committee. - answerFalse Based on PCAOB guidelines, the audit of ICFR and financial statements audit should be conducted as an "integrated audit." - answerTrue The PCAOB makes it clear that the CEO and CFO are responsible for the internal control over financial reporting and the preparation of the statements. - answerTrue The likelihood of an event is "more than remote" when it is "reasonably possible." - answerFalse When auditing a public company, the auditor must form an opinion on the effectiveness of internal control over financial reporting, or issue a disclaimer in the event of a scope limitation. - answerTrue In order for an external auditor to complete an audit of a public company, the entity's management must comply with all of the following except: A) accept responsibility for the effectiveness of the entity's internal control over financial reporting. B) evaluate the effectiveness of the entity's internal control over financial reporting using suitable control criteria. C) support its evaluation with sufficient evidence, including documentation. D) present an oral assessment of the effectiveness of the entity's internal control over financial reporting as of the end of the entity's most recent fiscal year. - answerD) present an oral assessment of the effectiveness of the entity's internal control over financial reporting as of the end of the entity's most recent fiscal year. An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley Act means: A) the auditor must consider the integrated thoughts and ideas of everyone on the audit staff. B) the auditor must conduct two audits, one on the effectiveness of internal control and one on the financial statements, in an integrated way. C) the auditor must integrate the same objectives whether auditing internal control or auditing the financial statements. D) two independent CPA firms must work together on the audit. - answerB) the auditor must conduct two audits, one on the effectiveness of internal control and one on the financial statements, in an integrated way. The PCAOB Auditing Standards require the auditor to provide which of the following? A) Reasonable assurance on the financial statements, absolute assurance on internal control. B) Reasonable assurance on internal control, absolute assurance on the financial statements. C) Absolute assurance on both the financial statements and internal control. D) Reasonable assurance on both the financial statements and internal control. - answerD) Reasonable assurance on both the financial statements and internal control. According to the PCAOB, who is responsible for the reliability of the internal controls over financial reporting process of an entity? A) The entity's CEO and/or CFO. B) The entity's board of directors. C) An internal control specialist. D) The external auditor. - answerA) The entity's CEO and/or CFO. The person in charge of authorizing credit to customers does not properly understand what constitutes a credit risk. This is an example of: A) A material weakness. B) A design deficiency. C) A deficiency in operation. D) This is not an internal control deficiency. - answerC) A deficiency in operation. A deficiency that implies that there is a reasonable possibility of misstatement in the financial statements that is significant but not material is: A) a material weakness. B) a significant deficiency. C) an insignificant deficiency. D) a probable deficiency. - answera significant deficiency. Which of the following is not a topic that requires special consideration by management during management's internal control assessment process and by the auditor during the audit of internal control?