Pre Post Test: Part C

Which of the following is NOT one of the five components of internal control according to ISA 315 (Revised)?

• Control environment

• Risk assessment process

• Information system

• Financial reporting process

The control environment is best described as:

• A set of specific control procedures

• The overall attitude, awareness, and actions of management

• The process of identifying and analyzing risks

• The information system relevant to financial reporting

Which of the following is an inherent limitation of internal control?

• Lack of management oversight

• Inadequate risk assessment

• The possibility of collusion

• Poor communication within the entity

When assessing the entity's risk assessment process, the auditor should:

• Perform the risk assessment for the entity

• Evaluate whether the process is appropriate to the entity's circumstances

• Ignore the entity's process and conduct their own assessment

• Only consider financial risks

Which technique is most effective for recording complex accounting systems?

• Narrative notes

• Flowcharts

• Internal Control Questionnaires (ICQs)

• Checklists

Internal Control Questionnaires (ICQs) are designed to:

• Evaluate the effectiveness of controls

• Determine if specific controls exist

• Assess the risk of material misstatement

• Document the accounting system

The main advantage of Internal Control Evaluation Questionnaires (ICEQs) over ICQs is:

• They are easier to prepare

• They focus on control objectives rather than specific controls

• They provide a more detailed description of the system

• They are always more accurate

A walkthrough test involves:

• Physically walking through the client's premises

• Following one or more transactions through the accounting system

• Testing every transaction in a given period

• Evaluating the physical security of assets

Tests of controls are designed to:

• Detect material misstatements in the financial statements

• Evaluate the operating effectiveness of controls

• Assess inherent risk

• Perform substantive testing

When performing tests of controls, the auditor should consider:

• Only the design of controls

• Only the implementation of controls

• Both the design and implementation of controls

• Neither the design nor the implementation of controls