SCMA 350 FINAL EXAM QUESTIONS & ANSWERS
Which of the following outcomes is a likely benefit of information technology used for
internal control?
Question 1 options:
A) Enhanced timeliness of information
B) Processing of unusual or nonrecurring transactions
C) Potential loss of data
D) Recording of unauthorized transactions - Answer -A) Enhanced timeliness of
information
Which of the following payroll control activities would most effectively ensure that
payment is made only for work performed?
Question 2 options:
A) Require employees to have their direct supervisors approve their time cards.
B) Require all employees to record arrival and departure by using the time clock.
C) Have a payroll clerk recalculate all time cards.
D) Require all employees to sign their time cards. - Answer -A) Require employees to
have their direct supervisors approve their time cards.
Which of the following is not a component of internal controls?
Question 3 options:
A) Control environment
B) Monitoring
C) Control activities
D) Inherent risk - Answer -D) Inherent risk
Which of the following statements is correct regarding internal control?
Question 4 options:
A) A well-designed and operated internal control environment should detect collusion
perpetrated by two people.
,B) An inherent limitation to internal control is the fact that controls can be circumvented
by management override.
C) A well-designed internal control environment ensures the achievement of an entity's
control objectives.
D) Internal control is a necessary business function and should be designed and
operated to detect all errors and fraud. - Answer -B) An inherent limitation to internal
control is the fact that controls can be circumvented by management override.
Obtaining an understanding of an internal control involves evaluating the design of the
control and determining whether the control has been
Question 5 options:
A) tested.
B) implemented.
C) authorized.
D) monitored. - Answer -B) implemented.
Which of the following is a factor in the control environment?
Question 6 options:
A) Performance reviews
B) Segregation of duties
C) Management's philosophy and operating style
D) Information processing - Answer -C) Management's philosophy and operating style
Regardless of the assessed level of control risk, an auditor of a non-public company
would perform some
Question 7 options:
A) substantive tests to restrict detection risk for significant transaction classes.
B) tests of controls to determine the effectiveness of internal control policies.
C) dual purpose tests to evaluate both the risk of monetary misstatement and
preliminary control risk.
D) analytical procedures to verify the design of internal control activities. - Answer -A)
substantive tests to restrict detection risk for significant transaction classes.
, Which of the following is the least important audit reason for the auditor's obtaining an
understanding of a company's internal control?
Question 8 options:
A) To consider factors that may affect the risk of material misstatement
B) To plan subsequent substantive tests
C) To serve as a basis for constructive suggestions
D) To identify types of possible misstatements that may occur - Answer -C) To serve as
a basis for constructive suggestions
If auditors assess control risk at the maximum level, they will tend to
Question 9 options:
A) perform a great deal of substantive testing during the audit.
B) perform more audit procedures using internal evidence.
C) perform a great deal of additional tests of controls.
D) perform substantive tests at an interim date. - Answer -A) perform a great deal of
substantive testing during the audit.
Proper separation of duties reduces the opportunities to allow persons to be in positions
to both
Question 10 options:
A) establish internal controls and authorize transactions.
B) record cash receipts and cash disbursements.
C) perpetrate a fraud and then conceal it in the books.
D) journalize entries and prepare financial statements. - Answer -C) perpetrate a fraud
and then conceal it in the books.
The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation
of the
Question 11 options:
A) factors that raise doubts about the auditability of the financial statements.
B) possibility that the nature and extent of substantive tests may be reduced.
Which of the following outcomes is a likely benefit of information technology used for
internal control?
Question 1 options:
A) Enhanced timeliness of information
B) Processing of unusual or nonrecurring transactions
C) Potential loss of data
D) Recording of unauthorized transactions - Answer -A) Enhanced timeliness of
information
Which of the following payroll control activities would most effectively ensure that
payment is made only for work performed?
Question 2 options:
A) Require employees to have their direct supervisors approve their time cards.
B) Require all employees to record arrival and departure by using the time clock.
C) Have a payroll clerk recalculate all time cards.
D) Require all employees to sign their time cards. - Answer -A) Require employees to
have their direct supervisors approve their time cards.
Which of the following is not a component of internal controls?
Question 3 options:
A) Control environment
B) Monitoring
C) Control activities
D) Inherent risk - Answer -D) Inherent risk
Which of the following statements is correct regarding internal control?
Question 4 options:
A) A well-designed and operated internal control environment should detect collusion
perpetrated by two people.
,B) An inherent limitation to internal control is the fact that controls can be circumvented
by management override.
C) A well-designed internal control environment ensures the achievement of an entity's
control objectives.
D) Internal control is a necessary business function and should be designed and
operated to detect all errors and fraud. - Answer -B) An inherent limitation to internal
control is the fact that controls can be circumvented by management override.
Obtaining an understanding of an internal control involves evaluating the design of the
control and determining whether the control has been
Question 5 options:
A) tested.
B) implemented.
C) authorized.
D) monitored. - Answer -B) implemented.
Which of the following is a factor in the control environment?
Question 6 options:
A) Performance reviews
B) Segregation of duties
C) Management's philosophy and operating style
D) Information processing - Answer -C) Management's philosophy and operating style
Regardless of the assessed level of control risk, an auditor of a non-public company
would perform some
Question 7 options:
A) substantive tests to restrict detection risk for significant transaction classes.
B) tests of controls to determine the effectiveness of internal control policies.
C) dual purpose tests to evaluate both the risk of monetary misstatement and
preliminary control risk.
D) analytical procedures to verify the design of internal control activities. - Answer -A)
substantive tests to restrict detection risk for significant transaction classes.
, Which of the following is the least important audit reason for the auditor's obtaining an
understanding of a company's internal control?
Question 8 options:
A) To consider factors that may affect the risk of material misstatement
B) To plan subsequent substantive tests
C) To serve as a basis for constructive suggestions
D) To identify types of possible misstatements that may occur - Answer -C) To serve as
a basis for constructive suggestions
If auditors assess control risk at the maximum level, they will tend to
Question 9 options:
A) perform a great deal of substantive testing during the audit.
B) perform more audit procedures using internal evidence.
C) perform a great deal of additional tests of controls.
D) perform substantive tests at an interim date. - Answer -A) perform a great deal of
substantive testing during the audit.
Proper separation of duties reduces the opportunities to allow persons to be in positions
to both
Question 10 options:
A) establish internal controls and authorize transactions.
B) record cash receipts and cash disbursements.
C) perpetrate a fraud and then conceal it in the books.
D) journalize entries and prepare financial statements. - Answer -C) perpetrate a fraud
and then conceal it in the books.
The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation
of the
Question 11 options:
A) factors that raise doubts about the auditability of the financial statements.
B) possibility that the nature and extent of substantive tests may be reduced.
