, IT Auditing 4th Ed—Test Bank, Chapter 1
v v v v v v
Chapter 1—Auditing and Internal Control
v v v v
TRUE/FALSE
1. Corporate management (including the CEO) must certify monthly and annually their organization’s
v v v v v v v v v v v
internal controls over financial reporting.
v v v v v
ANS: F v PTS: 1 v v
2. Both the SEC and the PCAOB require management to use the COBIT framework for assessing internal
v v v v v v v v v v v v v v v
control adequacy.
v v
ANS: F v PTS: 1 v v
3. Both the SEC and the PCAOB require management to use the COSO framework for assessing internal
v v v v v v v v v v v v v v v
control adequacy.
v v
ANS: F v PTS: 1 v v
4. Aqualified opinion on management’s assessment of internal controls over the financial reporting system
v v v v v v v v v v v v v
necessitates a qualified opinion on the financial statements?
v v v v v v v v
ANS: F v PTS: 1 v v
5. The same internal control objectives apply to manual and computer-based information systems.
v v v v v v v v v v v
ANS: T v PTS: 1 v v
6. The external auditor is responsible for establishing and maintaining the internal control system.
v v v v v v v v v v v v
ANS: F v PTS: 1 v v
7. Segregation of duties is an example of an internal control procedure. v v v v v v v v v v
ANS: T v PTS: 1 v v
8. Preventive controls are passive techniques designed to reduce fraud.
v v v v v v v v
ANS: T v PTS: 1 v v
9. A key modifying assumption in internal control is that the internal control system is the responsibility of
v v v v v v v v v v v v v v v v
management.
v
ANS: T v PTS: 1 v v
© 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
v v v v v v v v v v v v v v v v v v v v v v v v v v v v v
vlicense distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
v v v v v v v v v v v v v v v v v v v v v
, IT Auditing 4th Ed—Test Bank, Chapter 1
v v v v v v
10. While the Sarbanes-OxleyAct prohibits auditors from providing non-accounting services to their audit
v v v v v v v v v v v v
clients, they are not prohibited from performing such services for non-audit clients or privately held
v v v v v v v v v v v v v v v
companies.
v
ANS: T v PTS: 1 v v
11. The Sarbanes-OxleyAct requires the audit committee to hire and oversee the external auditors.
v v v v v v v v v v v v v
ANS: T v PTS: 1 v v
12. Section 404 requires that corporate management (including the CEO) certify their organization’s internal
v v v v v v v v v v v v
controls on a quarterly and annual basis.
v v v v v v v
ANS: F v PTS: 1 v v
13. Section 302 requires the management of public companies to assess and formally report on the
v v v v v v v v v v v v v v
effectiveness of their organization’s internal controls.
v v v v v v
ANS: F v PTS: 1 v v
14. Application controls apply to a wide range of exposures that threaten the integrity of all programs
v v v v v v v v v v v v v v v
processed within the computer environment.
v v v v v
ANS: F v PTS: 1 v v
15. Advisory services is an emerging field that goes beyond the auditor’s traditional attestation function.
v v v v v v v v v v v v v
ANS: T v PTS: 1 v v
16. An IT auditor expresses an opinion on the fairness of the financial statements.
v v v v v v v v v v v v
ANS: F v PTS: 1 v v
17. External auditing is an independent appraisal function established within an organization to examine and
v v v v v v v v v v v v v
evaluate its activities as a service to the organization.
v v v v v v v v v
ANS: F v PTS: 1 v v
18. External auditors can cooperate with and use evidence gathered by internal audit departments that are
v v v v v v v v v v v v v v
organizationally independent and that report to the Audit Committee of the Board of Directors.
v v v v v v v v v v v v v v
© 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
v v v v v v v v v v v v v v v v v v v v v v v v v v v v v
vlicense distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
v v v v v v v v v v v v v v v v v v v v v
, IT Auditing 4th Ed—Test Bank, Chapter 1
v v v v v v
ANS: T v PTS: 1 v v
19. Tests of controls determine whether the database contents fairly reflect the organization's transactions.
v v v v v v v v v v v v
ANS: F v PTS: 1 v v
20. Audit risk is the probability that the auditor will render an unqualified opinion on financial statements that are
v v v v v v v v v v v v v v v v v
materially misstated.
v v
ANS: T v PTS: 1 v v
21. Astrong internal control system will reduce the amount of substantive testing that must be performed.
v v v v v v v v v v v v v v v
ANS: T v PTS: 1 v v
22. Substantive testing techniques provide information about the accuracy and completeness of an
v v v v v v v v v v v
application's processes.
v v
ANS: F v PTS: 1 v v
MULTIPLE CHOICE v
1. The concept of reasonable assurance suggests that
v v v v v v
a. the cost of an internal control should be less than the benefit it provides
v v v v v v v v v v v v v
b. a well-designed system of internal controls will detect all fraudulent activity
v v v v v v v v v v
c. the objectives achieved by an internal control system vary depending on the data
v v v v v v v v v v v v
processing method
v v
d. the effectiveness of internal controls is a function of the industry environment
v v v v v v v v v v v
ANS: A
v v PTS: 1 v
2. Which of the following is not a limitation of the internal control system?
v v v v v v v v v v v v
a. errors are made due to employee fatigue v v v v v v
b. fraud occurs because of collusion between two employeesv v v v v v v
c. the industry is inherently risky v v v v
d. management instructs the bookkeeper to make fraudulent journal entries v v v v v v v v
ANS: C
v v PTS: 1 v
3. The most cost-effective type of internal control is
v v v v v v v
a. preventive control v
b. accounting control v
© 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
v v v v v v v v v v v v v v v v v v v v v v v v v v v v v
vlicense distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
v v v v v v v v v v v v v v v v v v v v v
v v v v v v
Chapter 1—Auditing and Internal Control
v v v v
TRUE/FALSE
1. Corporate management (including the CEO) must certify monthly and annually their organization’s
v v v v v v v v v v v
internal controls over financial reporting.
v v v v v
ANS: F v PTS: 1 v v
2. Both the SEC and the PCAOB require management to use the COBIT framework for assessing internal
v v v v v v v v v v v v v v v
control adequacy.
v v
ANS: F v PTS: 1 v v
3. Both the SEC and the PCAOB require management to use the COSO framework for assessing internal
v v v v v v v v v v v v v v v
control adequacy.
v v
ANS: F v PTS: 1 v v
4. Aqualified opinion on management’s assessment of internal controls over the financial reporting system
v v v v v v v v v v v v v
necessitates a qualified opinion on the financial statements?
v v v v v v v v
ANS: F v PTS: 1 v v
5. The same internal control objectives apply to manual and computer-based information systems.
v v v v v v v v v v v
ANS: T v PTS: 1 v v
6. The external auditor is responsible for establishing and maintaining the internal control system.
v v v v v v v v v v v v
ANS: F v PTS: 1 v v
7. Segregation of duties is an example of an internal control procedure. v v v v v v v v v v
ANS: T v PTS: 1 v v
8. Preventive controls are passive techniques designed to reduce fraud.
v v v v v v v v
ANS: T v PTS: 1 v v
9. A key modifying assumption in internal control is that the internal control system is the responsibility of
v v v v v v v v v v v v v v v v
management.
v
ANS: T v PTS: 1 v v
© 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
v v v v v v v v v v v v v v v v v v v v v v v v v v v v v
vlicense distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
v v v v v v v v v v v v v v v v v v v v v
, IT Auditing 4th Ed—Test Bank, Chapter 1
v v v v v v
10. While the Sarbanes-OxleyAct prohibits auditors from providing non-accounting services to their audit
v v v v v v v v v v v v
clients, they are not prohibited from performing such services for non-audit clients or privately held
v v v v v v v v v v v v v v v
companies.
v
ANS: T v PTS: 1 v v
11. The Sarbanes-OxleyAct requires the audit committee to hire and oversee the external auditors.
v v v v v v v v v v v v v
ANS: T v PTS: 1 v v
12. Section 404 requires that corporate management (including the CEO) certify their organization’s internal
v v v v v v v v v v v v
controls on a quarterly and annual basis.
v v v v v v v
ANS: F v PTS: 1 v v
13. Section 302 requires the management of public companies to assess and formally report on the
v v v v v v v v v v v v v v
effectiveness of their organization’s internal controls.
v v v v v v
ANS: F v PTS: 1 v v
14. Application controls apply to a wide range of exposures that threaten the integrity of all programs
v v v v v v v v v v v v v v v
processed within the computer environment.
v v v v v
ANS: F v PTS: 1 v v
15. Advisory services is an emerging field that goes beyond the auditor’s traditional attestation function.
v v v v v v v v v v v v v
ANS: T v PTS: 1 v v
16. An IT auditor expresses an opinion on the fairness of the financial statements.
v v v v v v v v v v v v
ANS: F v PTS: 1 v v
17. External auditing is an independent appraisal function established within an organization to examine and
v v v v v v v v v v v v v
evaluate its activities as a service to the organization.
v v v v v v v v v
ANS: F v PTS: 1 v v
18. External auditors can cooperate with and use evidence gathered by internal audit departments that are
v v v v v v v v v v v v v v
organizationally independent and that report to the Audit Committee of the Board of Directors.
v v v v v v v v v v v v v v
© 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
v v v v v v v v v v v v v v v v v v v v v v v v v v v v v
vlicense distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
v v v v v v v v v v v v v v v v v v v v v
, IT Auditing 4th Ed—Test Bank, Chapter 1
v v v v v v
ANS: T v PTS: 1 v v
19. Tests of controls determine whether the database contents fairly reflect the organization's transactions.
v v v v v v v v v v v v
ANS: F v PTS: 1 v v
20. Audit risk is the probability that the auditor will render an unqualified opinion on financial statements that are
v v v v v v v v v v v v v v v v v
materially misstated.
v v
ANS: T v PTS: 1 v v
21. Astrong internal control system will reduce the amount of substantive testing that must be performed.
v v v v v v v v v v v v v v v
ANS: T v PTS: 1 v v
22. Substantive testing techniques provide information about the accuracy and completeness of an
v v v v v v v v v v v
application's processes.
v v
ANS: F v PTS: 1 v v
MULTIPLE CHOICE v
1. The concept of reasonable assurance suggests that
v v v v v v
a. the cost of an internal control should be less than the benefit it provides
v v v v v v v v v v v v v
b. a well-designed system of internal controls will detect all fraudulent activity
v v v v v v v v v v
c. the objectives achieved by an internal control system vary depending on the data
v v v v v v v v v v v v
processing method
v v
d. the effectiveness of internal controls is a function of the industry environment
v v v v v v v v v v v
ANS: A
v v PTS: 1 v
2. Which of the following is not a limitation of the internal control system?
v v v v v v v v v v v v
a. errors are made due to employee fatigue v v v v v v
b. fraud occurs because of collusion between two employeesv v v v v v v
c. the industry is inherently risky v v v v
d. management instructs the bookkeeper to make fraudulent journal entries v v v v v v v v
ANS: C
v v PTS: 1 v
3. The most cost-effective type of internal control is
v v v v v v v
a. preventive control v
b. accounting control v
© 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
v v v v v v v v v v v v v v v v v v v v v v v v v v v v v
vlicense distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
v v v v v v v v v v v v v v v v v v v v v
