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WorksheetsConsideration of Internal Controls
Total questions: 20
Worksheet time: 7mins
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.
The control environment includes which of the following?
Control activities
Management policy and operating style
Assessing activity level risks
Application controls
The primary responsibility for establishing and maintaining internal control rests with the
Internal Auditors
Management
Securities and Exchange Commission
External Auditors
Which of the following is not part of control environment?
Management philosophy and operating style
Organizational structure
Information and communication systems
Assignment of authority and responsibility
Tests of controls are used to test whether controls are
Operating effectively.
Placed in operation (implemented).
Properly accumulated into balance sheet totals.
Properly documented by the client.
After documenting internal control in an audit engagement, the auditor may perform tests on
Those controls that the auditor plans to rely on.
Those controls in which deficiencies were identified.
Those controls that have a material effect on the financial statement balances.
A random sample of the controls that were reviewed.
Control testing is performed in order to determine whether or not
The assessed level of control risk can be reduced.
Necessary controls are absent.
Incompatible functions exist.
Material peso errors exist.
Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions on:
Authorization, execution, and payment.
Authorization, recording, and custody.
Custody, execution, and reporting.
Authorization, payment, and recording.
The procedures to test effectiveness of control policies and procedures in support of a reduced assessed control risk are called
Test of transactions
Analytical Test
Test of Control
A walk-through
The primary purpose of performing tests of controls is to provide reasonable assurance that
The internal control is effective
The accounting system is documented accurately
Transactions are recorded at the amounts executed
All control activities leave visible evidence
Tests of controls are directed toward the control’s
Efficiency
Efficiency and effectiveness
Effectiveness
Cost benefit ratio
