ACCY 131 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. Susan Campbell is an employee of HLC Building, Inc. She
is currently evaluating and improving risk management
for the construction division. Which type of audit is Susan
most likely working on?
Answer:
Internal audit
Question:
2. What is the difference between a compliance audit and
an operational audit?
Answer:
A compliance audit is an audit to determine whether the entity has conformed
with regulations, rules, or processes, whereas an operational audit is an
assessment of the economy, efficiency and effectiveness of an organization's
operations.
Question:
3. What is the difference between an integrated audit and a
compliance audit?
Answer:
An integrated audit is an audit that combines the financial statement audit with an
audit of the effectiveness of internal controls over financial reporting (ICFR),
whereas a compliance audit is an audit to determine whether the entity has
conformed with regulations, rules, or processes.
Question:
4. In the United States, how do public companies differ from
private companies in audit requirements?
Answer:
Public companies but not private companies are required to have an annual
financial audit.
,Question:
5. Gene Cosby is an IRS agent. He is currently gathering
evidence regarding the income tax deductions of G&M
Operations, Inc. Which type of audit is Gene most likely
working on?
Answer:
Compliance audit
Question:
6. Which of the following is NOT an example of a time or
cost constraint that an auditor may face when conducting
an audit?
Answer:
Audit industry guidelines require auditors to discover all misstatements.
Question:
7. Which of the following is the LEAST likely to be true
regarding an internal auditor?
Answer:
An external auditor may not rely on the work of the internal auditor.
Question:
8. Public companies are required to have two audits every
year. When they are performed together for efficiency, it
is referred to as a(an) _______ audit.
Answer:
integrated
Question:
9. Which type of audit assesses the economy, efficiency and
effectiveness of an organization's operations?
Answer:
Operational audit
Question:
10. Which of the following statements is incorrect regarding
internal controls?
Answer:
Effective internal controls over financial reporting provides no assurance
regarding the reliability of financial reporting and the preparation of financial
statements for internal purposes.
, Question:
11. The basis for opinion paragraph of an audit report over
the effectiveness of ICFR states that the Company's _______
are responsible for maintaining effective internal control
over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting.
Answer:
management
Question:
12. Management for a public company of less than $75
million in market value is responsible for all of the
following EXCEPT
Answer:
an audit of the internal controls over financial reporting.
Question:
13. In the title of the audit report on the effectiveness of
ICFR, the term registered is required to indicate that the
firm is registered with the
Answer:
PCAOB.
Question:
14. Which of the following statements is most correct
regarding integrated audits?
Answer:
For efficiency purposes, auditors will select audit procedures that allow them to
gather evidence that is useful to both of the audits.
and
Using professional judgment, auditors select the most critical internal controls
over financial reporting and test the effectiveness of those controls.
Question:
15. The reason SOX requires an audit of internal controls is
because effective ICFR provides reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes.
Answer:
true
CORRECT ANSWERS
Question:
1. Susan Campbell is an employee of HLC Building, Inc. She
is currently evaluating and improving risk management
for the construction division. Which type of audit is Susan
most likely working on?
Answer:
Internal audit
Question:
2. What is the difference between a compliance audit and
an operational audit?
Answer:
A compliance audit is an audit to determine whether the entity has conformed
with regulations, rules, or processes, whereas an operational audit is an
assessment of the economy, efficiency and effectiveness of an organization's
operations.
Question:
3. What is the difference between an integrated audit and a
compliance audit?
Answer:
An integrated audit is an audit that combines the financial statement audit with an
audit of the effectiveness of internal controls over financial reporting (ICFR),
whereas a compliance audit is an audit to determine whether the entity has
conformed with regulations, rules, or processes.
Question:
4. In the United States, how do public companies differ from
private companies in audit requirements?
Answer:
Public companies but not private companies are required to have an annual
financial audit.
,Question:
5. Gene Cosby is an IRS agent. He is currently gathering
evidence regarding the income tax deductions of G&M
Operations, Inc. Which type of audit is Gene most likely
working on?
Answer:
Compliance audit
Question:
6. Which of the following is NOT an example of a time or
cost constraint that an auditor may face when conducting
an audit?
Answer:
Audit industry guidelines require auditors to discover all misstatements.
Question:
7. Which of the following is the LEAST likely to be true
regarding an internal auditor?
Answer:
An external auditor may not rely on the work of the internal auditor.
Question:
8. Public companies are required to have two audits every
year. When they are performed together for efficiency, it
is referred to as a(an) _______ audit.
Answer:
integrated
Question:
9. Which type of audit assesses the economy, efficiency and
effectiveness of an organization's operations?
Answer:
Operational audit
Question:
10. Which of the following statements is incorrect regarding
internal controls?
Answer:
Effective internal controls over financial reporting provides no assurance
regarding the reliability of financial reporting and the preparation of financial
statements for internal purposes.
, Question:
11. The basis for opinion paragraph of an audit report over
the effectiveness of ICFR states that the Company's _______
are responsible for maintaining effective internal control
over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting.
Answer:
management
Question:
12. Management for a public company of less than $75
million in market value is responsible for all of the
following EXCEPT
Answer:
an audit of the internal controls over financial reporting.
Question:
13. In the title of the audit report on the effectiveness of
ICFR, the term registered is required to indicate that the
firm is registered with the
Answer:
PCAOB.
Question:
14. Which of the following statements is most correct
regarding integrated audits?
Answer:
For efficiency purposes, auditors will select audit procedures that allow them to
gather evidence that is useful to both of the audits.
and
Using professional judgment, auditors select the most critical internal controls
over financial reporting and test the effectiveness of those controls.
Question:
15. The reason SOX requires an audit of internal controls is
because effective ICFR provides reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes.
Answer:
true
