Chapter 10

The COSO internal control components not include:

• Control environment

• Risk assessment

• Control activities

• Risk management

The COSO stand for :

• Committee of Sponsoring Organizations

• Commitment of Sponsoring Organizations

• Committee of Sponsoring Operation

• Committee of Sponsor Organizations

 The auditor’s responsibilities include understanding and testing internal control over financial reporting.

• True

• False

Management responsibilities:

• Management’s Responsibilities for Establishing Internal Control

• Management’s section 404 reporting responsibilities

• Management’s assessment of internal control

• All correct

Which of the following statements about the nature and extent of tests of controls are true?

(1)Inquiry alone is not sufficient to test the operating effectiveness of controls

(2)The auditor must perform test of controls if substantive procedures alone cannot provide sufficient appropriate audit evidence

• Nether (1) nor (2)

• Both (1) and (2)

• Only (1)

• Only (2)

What type of evidence should be gathered in testing controls?

• Personal inquiries

• Re-performing of client procedures

• Review of documents

• All of the above

To provide for the greatest degree of independence in performing internal auditing functions, an internal auditor most likely should report to the:

• Financial vice-president.

• Corporate controller

• Audit committee

• Corporate stockholders

When tests of controls reveal that controls are operating as anticipated, it is most likely that the assessed level of control risk will:

• Be less than the preliminary assessed level of control risk

• Equal the preliminary assessed level of control risk

• Equal the actual control risk

• Be less than the actual control risk

In a financial statement audit performed following AICPA Professional Standards, how frequently must an auditor test operating effectiveness of controls that appear to function as they have in past years and on which the auditor wishes to rely upon in the current year?

• Monthly.

• Each audit

• At least every second audit

• At least every third audit

CPA firms may use written narratives to describe internal control in their audit working papers.

• True

• False