Auditing and Internal Control

An auditor considers internal control in order to:

• Determine whether assets are safeguarded.

• Suggest improvements in internal control.

• Plan the audit procedures.

• Express an opinion.

The primary objective of the 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 the timeliness of information.

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

• Control risk

• Control activities

• The information system

• The control environment

The auditor's review of the client's internal control is documented in order to substantiate

• Conformity of the accounting records with Philippine Financial Reporting Standards

• Representation as to adherence to requirements of management

• Representation as to compliance with Philippine Standards on Auditing

• The fairness of the financial statement presentation

Which of the following is not a part of the control environment?

• Management philosophy and operating style

• Organization structure

• Information and communication systems

• Assignment of authority and responsibility

The Philippines Standards on Auditing require the auditor to obtain an understanding of the client's internal controls

• For every audit

• For first time audits

• Sufficient to find any frauds with may exits

• Whenever it would be appropriate

The purpose of tests of controls is to provide reasonable assurance that the

• Accounting treatment of transactions and balances are valid and proper

• Control procedures are functioning as intended

• Entity has complied with disclosure requirements of PFRS

• Entity has complied with requirements of quality control

The auditor who becomes aware of reportable conditions is required to communicate such as a weakness to the

• Audit committee and client's legal counsel

• Board of directors and internal directors

• Senior management and board of directors

• Internal auditors and senior management

It is most appropriate that the tests of controls be applied to transactions and controls

• At the balance sheet date

• At each quarterly interim period

• For the entire period under audit

• At the beginning of the fiscal period