, th
ITAuditing 4 Ed—Test Bank,Chapter1 v N N v
Chapter1—Auditing and Internal Control N N v N
TRUE/FALSE
1. Corporatemanagement(includingtheCEO) mustcertifymonthlyandannuallytheirorganization‟s
N N N N N N N
internal controls over financial reporting.
N N N N N
ANS: F PTS: 1
2. BoththeSECandthePCAOBrequiremanagementtousetheCOBITframeworkforassessinginternal
N N N N N N N N N N N N N N
control adequacy.
N N
ANS: F PTS: 1
3. BoththeSECandthePCAOBrequiremanagementtousetheCOSOframeworkforassessinginternal
N N N N N N N N N N N N N N N
control adequacy.
N N
ANS: F PTS: 1
4. Aqualifiedopiniononmanagement‟s assessmentofinternalcontrolsoverthefinancialreportingsystem N N N N N N N N
necessitates a qualified opinion on the financial statements?
N N N N N N N N
ANS: F PTS: 1
5. Thesameinternalcontrolobjectivesapplytomanualandcomputer-basedinformationsystems.
N N N N N N N N N N
ANS: T PTS: 1
6. Theexternalauditorisresponsibleforestablishingandmaintainingtheinternalcontrolsystem.
N N N N N N N N N N
ANS: F PTS: 1
7. Segregationofdutiesisanexampleofaninternalcontrolprocedure. N N N N N N N N N
ANS: T PTS: 1
8. Preventivecontrolsarepassive techniques designedtoreduce fraud.
N N N N N N N N
ANS: T PTS: 1
9. A keymodifyingassumptionin internalcontrolisthat theinternalcontrolsystemistheresponsibilityof
N N N N vN N N N vN N N N N N N N
management.
N
ANS: T PTS: 1
© 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
N N N N N N N N N N N N N N N N N N N N N N N N N N N
Npermitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
N N N N N N N N N N N N N N N N N N N N N
, th
ITAuditing 4 Ed—Test Bank,Chapter1 v N N v
10. While the Sarbanes-OxleyAct prohibits auditors from providing non-accounting services to their audit
N N N N N N v v N N N
clients, they are not prohibited from performing such services for non-audit clients or privately held
N N N N N N N N N N N N N N N
companies.
N
ANS: T PTS: 1
11. TheSarbanes-OxleyActrequirestheauditcommitteetohireandoverseetheexternalauditors.
N N N N N N N N N N N N
ANS: T PTS: 1
12. Section404requiresthatcorporatemanagement (including theCEO)certifytheirorganization‟sinternal
N N N N v N N N N N
controls on a quarterly and annual basis.
N N N N N N N
ANS: F PTS: 1
13. Section302requiresthemanagementofpubliccompaniestoassessandformallyreportonthe
N N N N N N N N N N N N N N
effectiveness of their organization‟s internal controls.
N N N N N N
ANS: F PTS: 1
14. Applicationcontrolsapplytoa widerangeofexposuresthatthreatentheintegrityofallprograms
N N N N vN N N N N N N N N N N
processed within the computer environment.
N N N N N
ANS: F PTS: 1
15. Advisoryservicesisanemergingfieldthatgoesbeyond theauditor‟straditionalattestationfunction. N N N N N N N N N N N N
ANS: T PTS: 1
16. An ITauditorexpressesanopiniononthefairnessofthefinancialstatements.
vN N N N N N N N N N N N
ANS: F PTS: 1
17. Externalauditingisanindependentappraisalfunctionestablished withinanorganizationtoexamineand
N N N N N N N v N N N N N
evaluate its activities as a service to the organization.
N N N N N N N N N
ANS: F PTS: 1
18. Externalauditorscancooperatewithanduseevidencegatheredbyinternalauditdepartmentsthatare
N N N N N N N N N N N N N N
organizationally independent and that report to theAudit Committee of the Board of Directors.
N N N N N N N N N N N N N N
© 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
N N N N N N N N N N N N N N N N N N N N N N N N N N N
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
N N N N N N N N N N N N N N N N N N N N N N
, th
ITAuditing 4 Ed—Test Bank,Chapter1 v N N v
ANS: T PTS: 1
19. Testsofcontrolsdeterminewhetherthedatabasecontentsfairlyreflecttheorganization'stransactions.
N N N N N N N N N
ANS: F PTS: 1
20. Auditriskistheprobabilitythattheauditorwillrenderanunqualifiedopinion onfinancialstatementsthat are
N N N N N N N N N N N N vN N N N N
materially misstated.
N N
ANS: T PTS: 1
21. Astronginternalcontrol systemwillreducetheamountof substantivetestingthat mustbeperformed.
N N N N N N N N N N N N N N
ANS: T PTS: 1
22. Substantivetesting techniquesprovideinformationabouttheaccuracyandcompletenessofan
N v N N N N N N N N N
application's processes.
N N
ANS: F PTS: 1
MULTIPLECHOICE
1. Theconceptofreasonableassurancesuggeststhat
N N N N N N
a. thecostofaninternalcontrolshouldbelessthanthebenefititprovides
N N N N N N N N N N N N N
b. awell-designedsystemofinternalcontrolswilldetectallfraudulentactivity N N N N N N N N N
c. theobjectivesachievedbyaninternalcontrolsystemvarydependingonthedata
N N N N N N N N N N N
processing methodN N
d. theeffectivenessofinternalcontrolsisafunctionoftheindustryenvironment
N N N N N N N N N N N
N ANS: A N PTS: 1
2. Which ofthefollowing isnotalimitationoftheinternal controlsystem?
v N N vN N N N N N N N N
a. errorsaremadeduetoemployeefatigue N N N N N N
b. fraudoccursbecauseofcollusionbetweentwoemployees N N N N N N
c. theindustryis inherentlyrisky N N N N
d. managementinstructs thebookkeepertomakefraudulent journalentries N N N N
N ANS: C N PTS: 1
3. Themostcost-effectivetypeof internalcontrolis
N N N N N N N
a. preventivecontrol
b. accountingcontrol
© 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
N N N N N N N N N N N N N N N N N N N N N N N N N N N
Npermitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
N N N N N N N N N N N N N N N N N N N N N
ITAuditing 4 Ed—Test Bank,Chapter1 v N N v
Chapter1—Auditing and Internal Control N N v N
TRUE/FALSE
1. Corporatemanagement(includingtheCEO) mustcertifymonthlyandannuallytheirorganization‟s
N N N N N N N
internal controls over financial reporting.
N N N N N
ANS: F PTS: 1
2. BoththeSECandthePCAOBrequiremanagementtousetheCOBITframeworkforassessinginternal
N N N N N N N N N N N N N N
control adequacy.
N N
ANS: F PTS: 1
3. BoththeSECandthePCAOBrequiremanagementtousetheCOSOframeworkforassessinginternal
N N N N N N N N N N N N N N N
control adequacy.
N N
ANS: F PTS: 1
4. Aqualifiedopiniononmanagement‟s assessmentofinternalcontrolsoverthefinancialreportingsystem N N N N N N N N
necessitates a qualified opinion on the financial statements?
N N N N N N N N
ANS: F PTS: 1
5. Thesameinternalcontrolobjectivesapplytomanualandcomputer-basedinformationsystems.
N N N N N N N N N N
ANS: T PTS: 1
6. Theexternalauditorisresponsibleforestablishingandmaintainingtheinternalcontrolsystem.
N N N N N N N N N N
ANS: F PTS: 1
7. Segregationofdutiesisanexampleofaninternalcontrolprocedure. N N N N N N N N N
ANS: T PTS: 1
8. Preventivecontrolsarepassive techniques designedtoreduce fraud.
N N N N N N N N
ANS: T PTS: 1
9. A keymodifyingassumptionin internalcontrolisthat theinternalcontrolsystemistheresponsibilityof
N N N N vN N N N vN N N N N N N N
management.
N
ANS: T PTS: 1
© 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
N N N N N N N N N N N N N N N N N N N N N N N N N N N
Npermitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
N N N N N N N N N N N N N N N N N N N N N
, th
ITAuditing 4 Ed—Test Bank,Chapter1 v N N v
10. While the Sarbanes-OxleyAct prohibits auditors from providing non-accounting services to their audit
N N N N N N v v N N N
clients, they are not prohibited from performing such services for non-audit clients or privately held
N N N N N N N N N N N N N N N
companies.
N
ANS: T PTS: 1
11. TheSarbanes-OxleyActrequirestheauditcommitteetohireandoverseetheexternalauditors.
N N N N N N N N N N N N
ANS: T PTS: 1
12. Section404requiresthatcorporatemanagement (including theCEO)certifytheirorganization‟sinternal
N N N N v N N N N N
controls on a quarterly and annual basis.
N N N N N N N
ANS: F PTS: 1
13. Section302requiresthemanagementofpubliccompaniestoassessandformallyreportonthe
N N N N N N N N N N N N N N
effectiveness of their organization‟s internal controls.
N N N N N N
ANS: F PTS: 1
14. Applicationcontrolsapplytoa widerangeofexposuresthatthreatentheintegrityofallprograms
N N N N vN N N N N N N N N N N
processed within the computer environment.
N N N N N
ANS: F PTS: 1
15. Advisoryservicesisanemergingfieldthatgoesbeyond theauditor‟straditionalattestationfunction. N N N N N N N N N N N N
ANS: T PTS: 1
16. An ITauditorexpressesanopiniononthefairnessofthefinancialstatements.
vN N N N N N N N N N N N
ANS: F PTS: 1
17. Externalauditingisanindependentappraisalfunctionestablished withinanorganizationtoexamineand
N N N N N N N v N N N N N
evaluate its activities as a service to the organization.
N N N N N N N N N
ANS: F PTS: 1
18. Externalauditorscancooperatewithanduseevidencegatheredbyinternalauditdepartmentsthatare
N N N N N N N N N N N N N N
organizationally independent and that report to theAudit Committee of the Board of Directors.
N N N N N N N N N N N N N N
© 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
N N N N N N N N N N N N N N N N N N N N N N N N N N N
permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
N N N N N N N N N N N N N N N N N N N N N N
, th
ITAuditing 4 Ed—Test Bank,Chapter1 v N N v
ANS: T PTS: 1
19. Testsofcontrolsdeterminewhetherthedatabasecontentsfairlyreflecttheorganization'stransactions.
N N N N N N N N N
ANS: F PTS: 1
20. Auditriskistheprobabilitythattheauditorwillrenderanunqualifiedopinion onfinancialstatementsthat are
N N N N N N N N N N N N vN N N N N
materially misstated.
N N
ANS: T PTS: 1
21. Astronginternalcontrol systemwillreducetheamountof substantivetestingthat mustbeperformed.
N N N N N N N N N N N N N N
ANS: T PTS: 1
22. Substantivetesting techniquesprovideinformationabouttheaccuracyandcompletenessofan
N v N N N N N N N N N
application's processes.
N N
ANS: F PTS: 1
MULTIPLECHOICE
1. Theconceptofreasonableassurancesuggeststhat
N N N N N N
a. thecostofaninternalcontrolshouldbelessthanthebenefititprovides
N N N N N N N N N N N N N
b. awell-designedsystemofinternalcontrolswilldetectallfraudulentactivity N N N N N N N N N
c. theobjectivesachievedbyaninternalcontrolsystemvarydependingonthedata
N N N N N N N N N N N
processing methodN N
d. theeffectivenessofinternalcontrolsisafunctionoftheindustryenvironment
N N N N N N N N N N N
N ANS: A N PTS: 1
2. Which ofthefollowing isnotalimitationoftheinternal controlsystem?
v N N vN N N N N N N N N
a. errorsaremadeduetoemployeefatigue N N N N N N
b. fraudoccursbecauseofcollusionbetweentwoemployees N N N N N N
c. theindustryis inherentlyrisky N N N N
d. managementinstructs thebookkeepertomakefraudulent journalentries N N N N
N ANS: C N PTS: 1
3. Themostcost-effectivetypeof internalcontrolis
N N N N N N N
a. preventivecontrol
b. accountingcontrol
© 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
N N N N N N N N N N N N N N N N N N N N N N N N N N N
Npermitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system
N N N N N N N N N N N N N N N N N N N N N
