Consideration of Internal Controls

An auditor considers internal control in order to:

• Determine whether assets are safeguarded.

• Suggest improvements in internal control.

• Plan the audit procedure

• Express an opinion

The primary purpose of the auditor’s consideration of internal control is to provide a basis for

• Determine whether procedures and records that are concerned with the safeguarding of assets are

  reliable.

• Constructive suggestions to clients concerning deficiencies in internal control.

• Determine the nature, timing and extent of audit tests to be applied.

• The expression of an opinion.

The primary objective of procedures to be performed in obtaining an understanding of internal control is to

provide an auditor with

• An evidential matter for use in reducing detection risk

• Knowledge necessary to plan the audit

• A basis for which to modify tests of controls.

• Information necessary to prepare flowcharts.

A reason to establish internal control is to

• Have a basis of planning the audit.

• Provide reasonable assurance that the objectives of the organization are achieved.

• Encourage compliance with organizational objectives.

• Ensure the accuracy, reliability, and timeliness of information.

What is the primary purpose of effective internal control in an organization?

• Achievement of certain organizational goals.

• Completion of a successful audit for the entity.

• Shareholders’ involvement in the company’s success.

• Obtaining profitability and financial strength.

An effective internal control is not expected to provide a reasonable assurance regarding the achievement of

objectives concerning

• Reliability of financial reporting.

• Compliance to applicable laws and regulations.

• Elimination of material misstatements.

  D. Effectiveness and efficiency of operations

• Effectiveness and efficiency of operations.

Internal control is primarily established within a company to accomplish which of the following objective?

• Prevent irregularities

• Provide reasonable assurance that the company’s objectives will be achieved

• Catch all errors that may occur in the company

• Aid in the effective auditing of the company

Which of the following is not an element of an entity’s internal control?

• Control risk

• Control activities

• The information system

• The control environment

One of the major components of an organization’s internal control structure includes:

• Audit control risk

• The cost-benefit ratio

• Risk assessment

• Communication

6.     Which of the following best describes the interrelated components of internal control?

• Organizational structure, management philosophy, and planning

• Control environment, risk assessment, control activities, information and communication systems, and monitoring.

• Risk assessment, backup facilities, responsibility accounting and natural laws.

• Legal environment of the firm, management philosophy, and organizational structure.