ACC 403 Final Assessment Comprehensive Auditing and Internal Control Exam

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ACC 403 Final Assessment Comprehensive Auditing and Internal Control ExamQuestion 1When taken together, the concepts of risk and materiality in auditing:Answermeasure the uncertainty of amounts of a given magnitude.measure uncertainty only.measure magnitude only.measure inherent risk.Question 2Auditing standards ________ that the basis used to determine the preliminary judgment aboutmateriality be documented in the audit files.Answerpermitdo not allowrequirestrongly encourageQuestion 3Auditors are ________ to document the known and likely misstatements in the financialstatements under audit.Answerpermittedrequirednot allowedstrongly encouragedQuestion 4________ misstatements are those where the auditor can determine the amount of themisstatement in the account.AnswerPotentialLikelyKnownProjectedQuestion 5Inherent risk is ________ related to detection risk and ________ related to the amount of auditevidence.Answerdirectly, inverselydirectly, directlyinversely, inversely

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inversely, directlyQuestion 6Management must disclose material weaknesses in internal control in its audit report:Answerwhenever the weakness is deemed significant to a single class of transactions.whenever the weakness is significant to overall financial reporting objectives.if the weakness exists at the end of the year.only if the auditor identifies the weakness as significant.Question 7Which of the following deficiency exists if a necessary control is missing or not properlyformulated?AnswerControlSignificantDesignOperatingQuestion 8An act of two or more employees to steal assets and cover their theft by misstating theaccounting records would be referred to as:Answercollusion.a material weakness.a control deficiency.a significant deficiencyQuestion 9Sarbanes-Oxley requires management to issue an internal control report that includes twospecific items. Which of the following is one of these two requirements?AnswerA statement that management is responsible for establishing and maintaining an adequateinternal control structure and procedures for financial reportingA statement that management and the board of directors are jointly responsible for establishingand maintaining an adequate internal control structure andprocedures for financial reportingA statement that management, the board of directors, and the external auditors are jointlyresponsible for establishing and maintaining an adequate internal control structure andprocedures for financial reportingA statement that the external auditors are solely responsibleQuestion 10Which of the following components of the control environment define the existing lines ofresponsibility and authority?Answer

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Organizational structureManagement philosophy and operating styleHuman resource policies and practicesManagement integrity and ethical valuesQuestion 11Which of the following would the auditor be most concerned about regarding a heightened riskof intentional misstatement?AnswerSenior management emphasizes that it is very important to beat analyst estimates of earningsevery reporting period.Senior management emphasizes that budgeted amounts for expenses are to be achieved for eachreporting periodor explained in the variance analysis report.Senior management emphasizes that job rotation is a worthwhile corporate objective.Senior management emphasizes that job evaluations are based on performance.Question 12Companies may intentionally understate earnings when income is high to create ________ thatmay be used in future years to increase earnings.Answerincome smoothingcookie jar reservescashsalesQuestion 13Company management is often under pressure to increase revenue and/or net income. Oneapproach is to use a "bill and hold" arrangement. This is an example of which of the following?AnswerSignificant accounting estimatesFictitious revenue recordedPremature revenue recognizedAlteration of cutoff documentsQuestion 14Who is most likely to perpetrate fraudulent financial reporting?AnswerMembers of the board of directorsProduction employeesManagement of the companyThe internal auditorsQuestion 15Fraud awareness training should be:Answer

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broad and all-encompassing.extensive and include details for all functional areas.specifically related to the employee's job responsibility.focused on employees understanding the importance of ethics.Question 16Controls which are designed to assure that the information processed by the computer isauthorized, complete, and accurate are called:Answerinput controls.processing controls.output controls.general controls.Question 17The approach to auditing where the auditor does not test automated controls to reduce assessedcontrol risk is called:Answerthe single-stage audit.the test deck approach.auditing around the computer.generalized audit software (GAS).Question 18A ________ is responsible for controlling the use of computer programs, transaction files andother computer records and documentation and releases them to the operators only whenauthorized.Answersoftware engineerchief computer operatorlibrariandata control operatorQuestion 19A ________ total represents the summary total of codes from all records in a batch that do notrepresent a meaningful total.AnswerrecordhashoutputfinancialQuestion 20One of the unique risks of protecting hardware and data is:Answer

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