Test bank for Information technology auditing 4th edition by James a hall Ch

, ITAuditing4thEd—TestBank,Chapter1
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Chapter1—Auditing and Internal Control
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TRUE/FALSE

1. Corporate management(includingthe CEO) must certify monthlyand annuallytheirorganization’s
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internal controls over financial reporting.
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ANS: F m PTS: 1 m m




2. Both the SEC and the PCAOB require management to use the COBIT framework for assessing internal
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control adequacy.
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3. Both the SEC and the PCAOB require management to use the COSO framework for assessing internal
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control adequacy.
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4. Aqualifiedopinionon management’s assessmentof internal controlsover the financial reportingsystem
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necessitates a qualified opinion on the financial statements?
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5. The sameinternal control objectives apply to manual and computer-basedinformation systems.
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ANS: T m PTS: 1 m m




6. The external auditor is responsiblefor establishingand maintaining the internal control system.
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7. Segregationof duties is an example of an internal control procedure. m m m m m m m m m m




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8. Preventivecontrols arepassive techniques designed toreduce fraud.
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9. A key modifying assumption in internal control is that the internal control system is the responsibility of
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management.
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© 2016 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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, ITAuditing4thEd—TestBank,Chapter1
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10. While the Sarbanes-OxleyAct prohibits auditors from providingnon-accountingservices to their audit
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clients, they are not prohibited from performing such services for non-audit clients or privately held
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companies.
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11. The Sarbanes-OxleyAct requires the audit committee to hire and oversee the external auditors.
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12. Section404 requiresthat corporatemanagement (including the CEO) certifytheir organization’s internal
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controls on a quarterly and annual basis.
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ANS: F m PTS: 1 m m




13. Section 302 requires the management of public companies to assess and formally report on the
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effectiveness of their organization’s internal controls.
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14. Application controls apply to a wide range of exposures that threaten the integrity of all programs
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processed within the computer environment.
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15. Advisoryservices is an emergingfield that goes beyond the auditor’s traditional attestation function.
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16. An IT auditor expresses an opinion on the fairness of the financial statements.
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17. External auditing is an independent appraisal function establishedwithin an organization to examine and
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evaluate its activities as a service to the organization.
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18. External auditors can cooperate with and use evidence gathered by internal audit departments that are
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organizationally independent and that report to the Audit Committee of the Board of Directors.
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© 2016 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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, ITAuditing4thEd—TestBank,Chapter1
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19. Testsof controls determinewhether the database contentsfairly reflectthe organization's transactions.
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ANS: F m PTS: 1 m m




20. Audit risk is the probability that the auditor will render an unqualified opinion on financial statements that are
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materially misstated.
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21. Astrong internal control system will reduce the amount of substantive testing that must be performed.
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22. Substantivetestingtechniques provide information about the accuracy and completeness of an
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application's processes.
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MULTIPLE CHOICE m




1. The concept of reasonable assurance suggests that
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a. the cost of an internal control should be less than the benefit it provides
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b. a well-designed system of internal controls will detect all fraudulent activity
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c. the objectives achieved by an internal control system varydependingon the data
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processing method
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d. the effectivenessof internal controlsis a function of the industry environment
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ANS: A
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2. Whichof the following is not a limitation of the internal control system?
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a. errors are made due to employee fatigue m m m m m m




b. fraudoccurs because of collusion between two employees m m m m m m m




c. the industry is inherentlyrisky m m m m




d. managementinstructs thebookkeeperto makefraudulent journalentries m m m m m m m m




ANS: C
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3. The most cost-effectivetype of internal control is
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a. preventivecontrol m




b. accountingcontrol m




© 2016 Cengage Learning®. May not be scanned, copied or duplicated or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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