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WorksheetsPrelim Examination Acctg 20
Total questions: 24
Worksheet time: 19mins
A reason to establish internal control is to
Have a basis for 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
The following relates to internal control. Which of the following is incorrect?
Internal control systems refers to all the policies and procedures adopted by the management of an entity to assist in achieving management's objectives
A strong environment does not, by itself, ensure the effectiveness of the internal control system
The internal control system is confined to those matters which relate directly to the functions of the accounting system
In the audit of financial statements in accordance with the generally accepted accounting framework, the external auditor is only concerned with those policies and procedures within the accounting and internal control system that are relevant to the financial statements.
Which of the following appropriately describes internal audit activity's role in assisting the organization in maintaining effective controls?
Evaluating reliability and integrity of financial and operational information.
Evaluating safeguards over assets.
Evaluating compliance with laws, regulations, and Contracts.
All of these
When an organization has strong internal control, management can expect various benefits. The benefit least likely to occur is
Reduced cost of an external audit.
An elimination of employee fraud.
The availability of reliable data for decision making purposes and protection of important documents and records.
An assurance of compliance to applicable laws and regulations.
Which of the following is not an important aspect of good internal control?
Separation of authorization, recording and custody functions.
Rotation of controls.
A system of approvals and authorizations.
A system of comparisons and reconciliations.
Which of the following best describes the interrelated components of internal control?
Organizational structure, management philosophy and planning.
Control environment, risk assessment process, control activities, information system and communication, and monitoring of controls.
Risk assessment process, backup facilities, responsibility accounting and natural laws.
Legal environment of the firm, management philosophy, and organizational structure.
Which of the following best describes control environment?
The entity's process for identifying business risk relevant to financial reporting objectives.
The system for transferring information from transaction processing systems to the general ledger or the financial reporting system.
Policies and procedures that help ensure that management directives are carried out.
This includes the governance and management functions and the attitudes and awareness, and actions of those charged with governance and management concerning the entity's internal control and its importance to the entity.
Which of the following conditions supports strong internal control?
Strict monitoring by the BIR
The existence of related parties and related party transactions
Pressure by the financial community to improve earnings performance
An economic downturn
Which of the following best describes an inherent limitation of an internal control structure?
The benefits expected to be derived from effective internal control usually do not exceed the costs of such control.
The competence and integrity of client personnel provide an environment conducive to control and provide assurance that effective control will be achieved.
Procedures designed to assure the execution and recording of transactions in accordance with proper authorizations are effective against irregularities perpetrated by management.
Procedures whose effectiveness depends on segregation of duties can be circumvented by collusion.
Proper segregation of duties reduces the opportunities in which a person could both
Journalize entries and prepare financial statements.
Record cash receipt and record cash disbursements.
Establish internal controls and authorize transactions
Perpetuate errors and irregularities and conceal
Proper segregation of functional responsibilities in an effective structure of internal control calls for separation of the functions of
Authorization, execution, and payment
Authorization, recording, and custody
Custody, execution, and reporting
Authorization, payment, and recording
Which of the following types of audit uses laws and regulations as its criteria?
Performance Audit
Operational Audit
Financial Statement Audit
Compliance Audit
When the control risk determined to be at maximum level bases on the test of control conducted
The auditor should continue with the planned nature, extent and timing of the substantive tests
The extent of the substantive tests should be changed from larger sample size to small sample size
The nature of the substantive tests should be changed from more effective procedures to less effective procedures
The timing of the substantive tests should be changed from year-end to interim
Efficiency refers to the degree to which costs are reduced without reducing effectiveness.
True
False
Effectiveness refers to the degree to which costs are reduced without reducing efficiency.
True
False
Operational audits are primarily geared toward compliance.
True
False
The objectives of internal auditors are considerably broader than the objectives of external auditors.
True
False
Statement 1: Sufficiency is the measure of the quality of evidence.
Statement 2: Appropriateness is the measure of the quality of evidence; that is, its relevance and its reliability.
Both statements are true
Both statement are false
Statement 1 is True
Statement 2 is False
Statement 1 is False
Statement 2 is True
It is an incident or occurrence, from sources internal or external to an organization, which may affect the achievement of objectives. Events can have negative impact, positive impact or both. Events with negative impact represent risks. Events with positive impact represent opportunities.
(a)
It is the possibility that an event will occur and adversely affect the achievement of objectives. Risk is measured in terms of impact and likelihood.
(a)
It is a potential event or missed opportunity that may negatively impact your ability to meet your business objectives.
(a)
It is the possibility that an event will occur and positively affect the achievement of objectives.
(a)
Give atleast 3 elements of an Assurance Engagement (3 points)
Give 5 example of Audit Procedure to obtain Audit Evidence and give example (2 points each)
e.g. External Confirmation - Bank Confirmation
