Exam 2 Review

When the computer system checks whether a customer has reached their credit limit, this is an example of a/an

• information and communication principle

• internal audit control

• IT general control

• IT application control

_______ is an audit procedure that involves watching a process or procedure being carried out by client personnel.

• Recalculation

• Inspection

• Reperformance

• Observation

When testing for _______, auditors gather evidence that transactions & events have been recorded in the proper accounts.

• the existence assertion

• the rights and obligations assertion

• the presentation and disclosure assertion

• the classification assertion

Which of the following is not a component of internal control?

• risk assessment

• control environment

• information and communication

• compliance

Roll-forward procedures relate to _______.

• any audit procedure that updates audit findings to the audit report date

• auditors updating their audit findings from year-end through interim

• any substantive procedure performed after the balance sheet date

• auditors updating their audit findings from interim through year-end

Strong entity-level controls ________.

• have no bearing on inherent risk

• make it less likely that transaction-level controls will be effective

• generally increase inherent risk

• make it more likely that transaction-level controls will be effective

A(n) ________ provides evidence that the control being tested did not operate as intended.

• material weakness

• significant deficiency

• attribute sampling

• control deviation

When the risk of material misstatement for an assertion is high, the auditors ________.

• can gather less reliable and persuasive evidence

• should not attempt to audit this assertion

• should consider allowing the internal audit function to aid with testing

• must gather more reliable and persuasive evidence

Substantive procedures are audit procedures ________.

• performed during the risk assessment phase of the audit

• that are applied when internal controls are functioning as designed

• designed to aid testing of controls

• designed to detect material misstatements at the assertion level

The accuracy and valuation assertion relates to ________.

• the auditor's charges for fees and services provided

• ensuring records of ownership of assets is accurate

• all disclosures having been properly made

• financial information is disclosed fairly & in appropriate amounts