ACCT 410 RELIABLE EXAM REVISION QUESTIONS WITH CORRECT SOLUTIONS||100% GUARANTEED PASS||A+ GRADED||UPDATED 2025/2026 SYLLABUS||<<NEWEST VERSION>>

Ongoing evaluations, separate evaluations, or some combination of the two are used to ascertain whether each of the five components of internal control are present and functioning - ANSWER Monitoring of controls What are factors that affect the control environment? - ANSWER - Communication and enforcement of integrity and ethical values -a commitment to competence -participation of those charged with governance -management's philosophy and operating style -organizational structure -assignment of authority and responsibility -human resource policies and practices Which analytical procedure addresses financial statement risks? - ANSWER Final analytical procedures What are some common analytical procedures? - ANSWER -Compare client data and industry data -Compare client data with similar prior period data -Compare client data with client-determined expected results (i.e., budgets and projections) -Compare client data with auditor-determined expected results -Compare client data with expected results, using non-financial data What is some non-financial data that may be used to compare client data and expected results? - ANSWER -Manufacturing capacity -Economic conditions -Product quality -Customer satisfaction surveys -Competition -Product innovation Which internal controls are the most relevant to an audit? - ANSWER those pertaining to the preparation of financial statements for external reporting purposes What should the internal control system do? - ANSWER Ensure that assets and records are safeguarded and generate reliable information for decision making Set of standards, processes, and structures that provide the basis for carrying out internal control across the organization - ANSWER Control environment Dynamic and iterative process for identifying and analyzing risks to achieving the entity's objectives, thereby forming a basis for determining how risks should be managed - ANSWER Risk assessment process Necessary for the entity to carry out internal control responsibilities in support of achievement of its objectives. Enables personnel to understand internal control responsibilities and their importance to the achievement of objectives - ANSWER Information and communication Actions established by policies and procedures to help ensure that management directives to mitigate risks to the achievement of objectives are carried out - ANSWER Control activities What are examples of control activities? - ANSWER 1. Performance reviews 2. Information processing controls 3. Physical controls 4. Segregation of duties What does an effective accounting system do? - ANSWER 1. Identifies and records valid transactions 2. Describes on a timely basis the transactions in sufficient detail to be classified for financial reporting 3. Measures value of transactions to be properly values in financial statements 4. Determines time period in which transaction occurred 5. Properly presents transactions and disclosures in financial statements What does a proper understanding of the five components of internal control help an auditor to do? - ANSWER 1. Identify potential misstatements 2. Identify key controls 3. Find factors that affect the risk of material misstatement 4. design test of controls and substantive procedures How does an auditor gain an understanding of internal controls? - ANSWER 1. read prior year control documentation 2. talk with client about changes 3. interview personnel about how they process transactions 4. interview and review work of members of internal audit function 5. observe personnel performing control activities 6. read client's policy and procedure manuals 7. inspect company records for evidence of control activities being performed 8. complete internal control questionnaire 9. perform walkthroughs How do auditors document their understanding of client's internal controls? - ANSWER -scan in procedure manuals and organizational charts -upload internal control questionnaires -add narrative description of controls as a memo to audit file -make flowchart of internal control processes What is the Audit risk model? - ANSWER AR = IR x CR x DR Which assertion does the following audit procedure test? Evaluate allowance for uncollectible accounts. Compute reserve estimate based on age categories and compare it to the recorded allowance amount. Propose adjusting journal entry if difference between client balance and auditor assessment is material. - ANSWER Valuation Which assertion does the following audit procedure test? Sum the total of customer account credit balances in accounts receivable. Consider reclassifying to accounts payable if significant/material. - ANSWER Classification Used to assist the auditor to better understand the business and to plan the nature, timing, and extent of audit procedures. Attempts to identify which accounts are likely to contain errors. - ANSWER Preliminary Analytical Procedures Used to obtain evidential matter about particular assertions related to account balances or classes of transactions. (not always reliable but can be used as reasonableness check) - ANSWER Substantive Analytical Procedures Used of an overall review of the financial information in the final review stage of the audit. Usually completed by the audit partner. - ANSWER Final Analytical Procedures Which analytical procedure helps direct attention to where auditors should focus effort? - ANSWER Preliminary analytical procedures Which two analytical procedures reduce level of substantive tests of details of transactions and account balances? - ANSWER Preliminary & Substantive Analytical procedures