Chaper 5: Assurance

Business risk is the risk inherent to the company in its operations.

• True

• False
  

Business risk is of no relevance to the auditor. The auditor is only concerned with audit risk.

• True

• False
  

Management is responsible for identifying and controlling business risks.

• True

• False
  

The financial controller signs an expense report after reviewing whether the expenses seem reasonable and within policy.

• Verification

• Authorisation and approval
  

The payables ledger clerk posts invoices to the payables ledger. The cash clerk posts cash payments to the payables ledger.

• Segregation of duties
  

• Verification

Password protection limiting access to data

• General IT

• Information processing

Range checks on payroll processing

• General IT

• Information processing
  

Manual checks to ensure that timesheets are authorised before details are processed

• General IT

• Information processing

Which three of the following are general IT controls?

• Disaster recovery procedures

• Back-up copies of programs stored at an alternative safe location
  

• Procedures for resubmission of rejected data
  

• Staff training in the use of new/revised programs
  

Which two of the following are reasons why organisations need to have effective systems of internal control?

• minimising business risks
  

• maximising its profitability
  

• managing its assets and liabilities
  

• cutting down the time needed for the audit
  

• complying with laws and regulations