Audit - Chapter 7, Audit Quiz 5 (Part 2), Final Exam
Practice Set Part 8 Tests of Inventory With Thorough
Explanations and Correct Responses Questions
from Premier Scholars Worldwide
Which of the following best describes an inherent limitation that should be recognized by
an auditor when considering the potential effectiveness of internal control?
A. The benefits expected to be derived from effective internal control usually do not exceed
the costs of such control.
B. The competence and integrity of client personnel provide an environment conducive to
control and provides assurance that effective control will be achieved.
C. Procedures designed to assure the execution and recording of transactions in
accordance with proper authorizations are effective against fraud perpetrated by
management.
D. Controls, whether manual or automated, whose effectiveness depends on segregation
of duties can be circumvented by collusion. - CORRECT ANSWER- -d
Although substantive procedures may support the accuracy of underlying records, these
tests frequently provide no affirmative evidence of segregation of duties because
A. The records may be accurate even though they are maintained by a person who
performs incompatible functions.
B. 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.
C. Substantive procedures relate to the entire period under audit, but tests of controls
ordinarily are confined to the period during which the auditor is on the client's premises.
D. Substantive procedures rarely guarantee the accuracy of the records if only a sample of
the transactions has been tested. - CORRECT ANSWER- -a
,Internal control has five components: the control environment, risk assessment,
information and communication, monitoring, and control activities. Control activities
relevant to an audit may be categorized as policies and procedures that pertain to
A. Reviewing actual performance.
B. Making a commitment to competence.
C. Maintaining effective human resource policies.
D. Developing a proper organizational structure. - CORRECT ANSWER- -a
Which of the following are considered control environment elements?
Detection
Commitment
Risk
to Competence
A.
No
Yes
B.
Yes
Yes
C.
No
No
D.
, Yes
No - CORRECT ANSWER- -a
Which of the following factors are included in an entity's control environment?
Audit
Integrity
Committee
and Ethical
Organizational
Participation
Values
Structure
A.
Yes
Yes
Yes
B.
Yes
Yes
No
C.
Yes
No
Yes
Practice Set Part 8 Tests of Inventory With Thorough
Explanations and Correct Responses Questions
from Premier Scholars Worldwide
Which of the following best describes an inherent limitation that should be recognized by
an auditor when considering the potential effectiveness of internal control?
A. The benefits expected to be derived from effective internal control usually do not exceed
the costs of such control.
B. The competence and integrity of client personnel provide an environment conducive to
control and provides assurance that effective control will be achieved.
C. Procedures designed to assure the execution and recording of transactions in
accordance with proper authorizations are effective against fraud perpetrated by
management.
D. Controls, whether manual or automated, whose effectiveness depends on segregation
of duties can be circumvented by collusion. - CORRECT ANSWER- -d
Although substantive procedures may support the accuracy of underlying records, these
tests frequently provide no affirmative evidence of segregation of duties because
A. The records may be accurate even though they are maintained by a person who
performs incompatible functions.
B. 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.
C. Substantive procedures relate to the entire period under audit, but tests of controls
ordinarily are confined to the period during which the auditor is on the client's premises.
D. Substantive procedures rarely guarantee the accuracy of the records if only a sample of
the transactions has been tested. - CORRECT ANSWER- -a
,Internal control has five components: the control environment, risk assessment,
information and communication, monitoring, and control activities. Control activities
relevant to an audit may be categorized as policies and procedures that pertain to
A. Reviewing actual performance.
B. Making a commitment to competence.
C. Maintaining effective human resource policies.
D. Developing a proper organizational structure. - CORRECT ANSWER- -a
Which of the following are considered control environment elements?
Detection
Commitment
Risk
to Competence
A.
No
Yes
B.
Yes
Yes
C.
No
No
D.
, Yes
No - CORRECT ANSWER- -a
Which of the following factors are included in an entity's control environment?
Audit
Integrity
Committee
and Ethical
Organizational
Participation
Values
Structure
A.
Yes
Yes
Yes
B.
Yes
Yes
No
C.
Yes
No
Yes
