ACT 235 - EXAM 2 - 2026 COMPLETE MC QUESTIONS
WITH CORRECT DETAILED ANSWERS || 100%
GUARANTEED PASS <RECENT VERSION>
Mailing monthly statements to customers is an internal control that is ordinarily not related to
the:
A. Valuation or allocation assertion for sales transactions.
B. Rights and Obligations assertions for sales adjustment transactions.
C. Completeness assertion for cash collections.
D. Completeness assertion for sales adjustment transactions.
-CORRECT ANSWER- B
The primary purpose of tests of controls is to provide reasonable assurance that:
A. The accounting and administrative control procedures are adequately designed to insure
employee compliance therewith.
B. The accounting and administrative control procedures are being applied as prescribed.
C. The administrative control procedures are being applied as prescribed.
D. The accounting control procedures are being applied as prescribed.
-CORRECT ANSWER- D
In the evaluation of an internal control structure, the auditor is concerned basically that the
system provides reasonable assurance that:
A. Management cannot override the system.
B. Operational efficiency has been achieved in accordance with management plans.
C. Material misstatements have been prevented or detected.
D. Controls have not been circumvented by collusion.
-CORRECT ANSWER- C
,Which of the following statements characterizes the activity of an independent auditor's
evaluation on an internal control structure?
A. The auditor should decrease testing of controls when weaknesses in cash receipts are
mitigated by strong controls in cash disbursement procedures.
B. The auditor should increase tests of controls when weaknesses in billing procedures are
mitigated by strong controls in collection procedures.
C. The auditor generally should not separately evaluate procedures that result in entries to
particular accounts but should confine the evaluation to broad classes of transactions.
D. The auditor should evaluate all internal control structure weaknesses before determining the
control policies or procedures that should prevent or detect errors and irregularities.
-CORRECT ANSWER- C
Which of the following is the correct order of performing the auditing procedures A through C,
where A is tests of controls, B is preparation of flowcharts depicting the client's internal control
structure, and C is substantive tests?
A. ABC
B. ACB
C. BAC
D. BCA
-CORRECT ANSWER- C
Which of the following statements about internal control is correct?
A. A properly maintained internal control structure reasonably ensures that collusion among
employees cannot occur.
B. The establishment and maintenance of the internal control structure are important
responsibilities of the internal auditor.
C. An exceptionally strong internal control structure is enough for the auditor to eliminate
substantive tests on a significant account balance.
D. The cost-benefit relationship is a primary criterion that should be considered in designing an
internal control structure. -CORRECT ANSWER- D
, Which of the following internal controls is most likely to reduce control risk for the existence or
occurrence assertion for sales transactions?
A. The credit department must authorize all credit sales more than $1,000.
B. All sales invoices are traced to supporting documents.
C. Pre-numbered remittance advices are prepared for cash received through the mail.
D. All shipping documents are traced to supporting sales invoices.
-CORRECT ANSWER- B.
- Answer D is a completeness test
In planning an audit of a new client, an auditor most likely would consider the methods used to
process accounting information because such methods.
A. Influence the design of the internal control structure.
B. Affect the auditor's preliminary judgment about materiality levels.
C. Assist in evaluating the planned audit objectives.
D. Determine the auditor's acceptable level of audit risk.
-CORRECT ANSWER- A
Which of the following types of audit evidence is most persuasive?
A. Prenumbered client purchase order forms.
B. Client work sheets supporting cost allocations.
C. Bank statements obtained from the client.
D. Client representation letter.
-CORRECT ANSWER- C
Audit Plans (Programs) should be designed so that
A. Most of the required procedures can be performed as interim work.
WITH CORRECT DETAILED ANSWERS || 100%
GUARANTEED PASS <RECENT VERSION>
Mailing monthly statements to customers is an internal control that is ordinarily not related to
the:
A. Valuation or allocation assertion for sales transactions.
B. Rights and Obligations assertions for sales adjustment transactions.
C. Completeness assertion for cash collections.
D. Completeness assertion for sales adjustment transactions.
-CORRECT ANSWER- B
The primary purpose of tests of controls is to provide reasonable assurance that:
A. The accounting and administrative control procedures are adequately designed to insure
employee compliance therewith.
B. The accounting and administrative control procedures are being applied as prescribed.
C. The administrative control procedures are being applied as prescribed.
D. The accounting control procedures are being applied as prescribed.
-CORRECT ANSWER- D
In the evaluation of an internal control structure, the auditor is concerned basically that the
system provides reasonable assurance that:
A. Management cannot override the system.
B. Operational efficiency has been achieved in accordance with management plans.
C. Material misstatements have been prevented or detected.
D. Controls have not been circumvented by collusion.
-CORRECT ANSWER- C
,Which of the following statements characterizes the activity of an independent auditor's
evaluation on an internal control structure?
A. The auditor should decrease testing of controls when weaknesses in cash receipts are
mitigated by strong controls in cash disbursement procedures.
B. The auditor should increase tests of controls when weaknesses in billing procedures are
mitigated by strong controls in collection procedures.
C. The auditor generally should not separately evaluate procedures that result in entries to
particular accounts but should confine the evaluation to broad classes of transactions.
D. The auditor should evaluate all internal control structure weaknesses before determining the
control policies or procedures that should prevent or detect errors and irregularities.
-CORRECT ANSWER- C
Which of the following is the correct order of performing the auditing procedures A through C,
where A is tests of controls, B is preparation of flowcharts depicting the client's internal control
structure, and C is substantive tests?
A. ABC
B. ACB
C. BAC
D. BCA
-CORRECT ANSWER- C
Which of the following statements about internal control is correct?
A. A properly maintained internal control structure reasonably ensures that collusion among
employees cannot occur.
B. The establishment and maintenance of the internal control structure are important
responsibilities of the internal auditor.
C. An exceptionally strong internal control structure is enough for the auditor to eliminate
substantive tests on a significant account balance.
D. The cost-benefit relationship is a primary criterion that should be considered in designing an
internal control structure. -CORRECT ANSWER- D
, Which of the following internal controls is most likely to reduce control risk for the existence or
occurrence assertion for sales transactions?
A. The credit department must authorize all credit sales more than $1,000.
B. All sales invoices are traced to supporting documents.
C. Pre-numbered remittance advices are prepared for cash received through the mail.
D. All shipping documents are traced to supporting sales invoices.
-CORRECT ANSWER- B.
- Answer D is a completeness test
In planning an audit of a new client, an auditor most likely would consider the methods used to
process accounting information because such methods.
A. Influence the design of the internal control structure.
B. Affect the auditor's preliminary judgment about materiality levels.
C. Assist in evaluating the planned audit objectives.
D. Determine the auditor's acceptable level of audit risk.
-CORRECT ANSWER- A
Which of the following types of audit evidence is most persuasive?
A. Prenumbered client purchase order forms.
B. Client work sheets supporting cost allocations.
C. Bank statements obtained from the client.
D. Client representation letter.
-CORRECT ANSWER- C
Audit Plans (Programs) should be designed so that
A. Most of the required procedures can be performed as interim work.
