ACCT 4301 Exam 2 Test Questions and Correct Answers

After obtaining an understanding of an entity's internal control system, an auditor may set control risk at high for some assertions because he or she Believes the internal controls are unlikely to be effective. Which of the following situations is NOT an example of an inherent limitation of internal controls A lack of physical controls over the safeguarding of assets allows an employee to steal company assets. The following are inherent limitations of internal control -A programmer makes an error in the design of an automated control that allows an employee to give himself an unauthorized pay increase -The CFO pressures a subordinate to make a false journal entry to increase revenue. -A fraud scheme exists whereby an employee orders personal goods and his supervisor, who is in on the scheme, signs the checks to pay for those goods. Speedy Payroll processes payroll transactions for Goldstein Bears, a manufacturer. Everett, CPA, is engaged to report on management's description of Speedy Payroll and the suitability of the design and operating effectiveness of internal control. These controls are relevant to Goldstein Bears' internal control, so Everett's report may be useful for Goldstein Bears' auditor. Everett's report should: Include an opinion on the operating effectiveness of Speedy Payroll's internal control Assessing control risk below high involves all of the following expect Concluding that controls are ineffective. According to COSO, each of the following is an example of an appropriate ongoing monitoring activity except: Approval of high-dollar transaction by a supervisor. Each of the following is an appropriate monitoring activity -Follow-up of customer and vendor complaints regarding amounts due and owed. -Periodic analysis of variances between expectations and actual results. -Comparisons of information from various sources within the company. An "integrated audit" as stated in Section 404 of SOX means The auditor must conduct two audits, one on the effectiveness of internal control and one of the financial statements, in an integrated way.