When considering internal control, an auditor should be aware of the concept of reasonable assurance, which recognizes that

Proper segregation of functional responsibilities calls for separation of the functions of

An entity’s ongoing monitoring activities often include

The overall attitude and awareness of an entity’s board of directors concerning the importance of internal control usually is reflected in its

Management philosophy and operating style most likely would have a significant influence on an entity’s control environment when

Which of the following factors are included in an entity’s control environment?

Which of the following is not a component of an entity’s internal control?

Which of the following is a provision of the Foreign Corrupt Practices Act?

An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors’ invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all

Which of the following procedures most likely would provide an auditor with evidence about whether an entity’s internal control activities are suitably designed to prevent or detect material misstatements?

Which statement is correct concerning the relevance of various types of controls to a financial audit?

In an audit of financial statements in accordance with generally accepted auditing standards, an auditor is required to

In obtaining an understanding of an entity’s internal control relevant to audit planning, an auditor is required to obtain knowledge about the

An auditor should obtain sufficient knowledge of an entity’s information system to understand the

When obtaining an understanding of an entity’s internal control, an auditor should concentrate on the substance of controls rather than their form because

Decision tables differ from program flowcharts in that decision tables emphasize

During the consideration of internal control in a financial statement audit, an auditor is not obligated to

The primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with

Which of the following statements regarding auditor documentation of the client’s internal control is correct?

In obtaining an understanding of an entity’s internal control, an auditor is required to obtain knowledge about the

Control risk should be assessed in terms of

After assessing control risk at below the maximum level, an auditor desires to seek a further reduction in the assessed level of control risk. At this time, the auditor would consider whether

Assessing control risk at below the maximum level most likely would involve

An auditor assesses control risk because it

When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the

When assessing control risk below the maximum level, an auditor is required to document the auditor’s

An auditor uses the knowledge provided by the understanding of internal control and the assessed level of control risk primarily to

An auditor may compensate for a weakness in internal control by increasing the

Which of the following statements is correct concerning an auditor’s assessment of control risk?

Regardless of the assessed level of control risk, an auditor would perform some

Before assessing control risk at a level lower than the maximum, the auditor obtains reasonable assurance that controls are in use and operating effectively. This assurance is most likely obtained in part by

An auditor generally tests the segregation of duties related to inventory by

The objective of tests of details of transactions performed as tests of controls is to

After obtaining an understanding of internal control and assessing control risk, an auditor decided to perform tests of controls. The auditor most likely decided that

In assessing control risk, an auditor ordinarily selects from a variety of techniques, including

Which of the following types of evidence would an auditor most likely examine to determine whether controls are operating as designed?

Which of the following is not a step in an auditor’s decision to assess control risk at below the maximum?

To obtain evidential matter about control risk, an auditor selects tests from a variety of techniques including

Which of the following is least likely to be evidence the auditor examines to determine whether controls are operating effectively?

Which of the following procedures concerning accounts receivable would an auditor most likely perform to obtain evidential matter in support of an assessed level of control risk below the maximum level?

Which of the following procedures would an auditor most likely perform to test controls relating to management’s assertion about the completeness of cash receipts for cash sales at a retail outlet?

Sound internal control dictates that immediately upon receiving checks from customers by mail, a responsible employee should

Tracing shipping documents to prenumbered sales invoices provides evidence that

Which of the following controls most likely would reduce the risk of diversion of customer receipts by an entity’s employees?

An auditor suspects that a client’s cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditor most likely would compare the

Upon receipt of customers’ checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the

Which of the following procedures most likely would not be a control designed to reduce the risk of misstatements in the billing process?

Which of the following audit procedures would an auditor most likely perform to test controls relating to management’s assertion concerning the completeness of sales transactions?

Which of the following controls most likely would assure that all billed sales are correctly posted to the accounts receivable ledger?

An auditor tests an entity’s policy of obtaining credit approval before shipping goods to customers in support of management’s financial statement assertion of

Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded?

Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?

Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments?

Employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals and

During the consideration of a small business client’s internal control, the auditor discovered that the accounts receivable clerk approves credit memos and has access to cash. Which of the following controls would be most effective in offsetting this weakness?

When a customer fails to include a remittance advice with a payment, it is common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees?

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also

In assessing control risk for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support?

Which of the following controls is not usually performed in the vouchers payable department?

With properly designed internal control, the same employee most likely would match vendors’ invoices with receiving reports and also

An entity’s internal control requires for every check request that there be an approved voucher, supported by a prenumbered purchase order and a prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures, an auditor most likely would select items for testing from the population of all

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases?

For effective internal control, the accounts payable department generally should

Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the

A client erroneously recorded a large purchase twice. Which of the following internal control measures would be most likely to detect this error in a timely and efficient manner?

With well-designed internal control, employees in the same department most likely would approve purchase orders, and also

In obtaining an understanding of a manufacturing entity’s internal control over inventory balances, an auditor most likely would

Which of the following controls most likely would be used to maintain accurate inventory records?

A client maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably

Which of the following controls most likely addresses the completeness assertion for inventory?

Sound internal control dictates that defective merchandise returned by customers should be presented initially to the

Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate controls over the invoicing function allow goods to be shipped that are not invoiced. The inadequate controls could cause an

Which of the following is a question that the auditor would expect to find on the production cycle section of an internal control questionnaire?

The objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded, and that

An auditor vouched data for a sample of employees in a payroll register to approved clock card data to provide assurance that

Which of the following is a control that most likely could help prevent employee payroll fraud?

In determining the effectiveness of an entity’s controls relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and

An auditor most likely would assess control risk at the maximum if the payroll department supervisor is responsible for

Which of the following controls most likely would prevent direct labor hours from being charged to manufacturing overhead?

In meeting the control objective of safeguarding of assets, which department should be responsible for

Proper internal control over the cash payroll function would mandate which of the following?

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the

To minimize the opportunities for fraud, unclaimed cash payroll should be

The auditor may observe the distribution of paychecks to ascertain whether

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable?

The primary responsibility of a bank acting as registrar of capital stock is to

Where no independent stock transfer agents are employed and the corporation issues its own stocks and maintains stock records, canceled stock certificates should

Which of the following is not a control that is designed to protect investment securities?

Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed?

A weakness in internal control over recording retirements of equipment may cause an auditor to

Which of the following questions would an auditor least likely include on an internal control questionnaire concerning the initiation and execution of equipment transactions?

Which of the following controls would be most effective in assuring that the proper custody of assets in the investing cycle is maintained?

A company holds bearer bonds as a short-term investment. Responsibility for custody of these bonds and submission of coupons for periodic interest collections probably should be delegated to the

Which of the following controls would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?

Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities?

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs

In general, material fraud perpetrated by which of the following are most difficult to detect?

Which of the following matters would an auditor most likely consider to be a reportable condition to be communicated to the audit committee?

In identifying matters for communication with an entity’s audit committee, an auditor most likely would ask management whether

Which of the following statements is correct concerning reportable conditions in an audit?

Which of the following statements is correct concerning an auditor’s required communication with an entity’s audit committee?

An auditor’s letter issued on reportable conditions relating to an entity’s internal control observed during a financial statement audit should

An auditor would least likely initiate a discussion with a client’s audit committee concerning

Which of the following statements is correct about an auditor’s required communication with an entity’s audit committee?

Which of the following statements is correct concerning an auditor’s required communication of reportable conditions?

Which of the following statements is correct concerning reportable conditions noted in an audit?

Which of the following representations should not be included in a report on internal control related matters noted in an audit?

Which of the following matters is an auditor required to communicate to an entity’s audit committee? I. Disagreements with management about matters significant to the entity’s financial statements that have been satisfactorily resolved. II. Initial selection of significant accounting policies in emerging areas that lack authoritative guidance.

Should an auditor communicate the following matters to an audit committee of a public entity?

A previously communicated reportable condition that has not been corrected should ordinarily be communicated again if

Which of the following statements concerning material weaknesses and reportable conditions is correct?

Reportable conditions are matters that come to an auditor’s attention that should be communicated to an entity’s audit committee because they represent

During the audit the independent auditor identified the existence of a weakness in the client’s internal control and orally communicated this finding to the client’s senior management and audit committee. The auditor should

In reporting on an entity’s internal control over financial reporting, a practitioner should include a paragraph that describes the

Brown, CPA, has accepted an engagement to examine and report on Crow Company’s internal control. In what form may Crow present its written assertion? I. In a separate report that will accompany Brown’s report. II. In a representation letter to Brown.

Which of the following best describes a CPA’s engagement to report on an entity’s internal control over financial reporting?

An engagement to examine internal control will generally

How do the scope, procedures, and purpose of an examination of internal control compare to those for obtaining an understanding of internal control and assessing control risk as part of an audit?

When an independent auditor reports on internal control based on criteria established by governmental agencies, the report should

When an examination has been performed on the effectiveness of entity’s internal control over financial reporting and a material weakness has been noted, the practitioner’s report should express an opinion on

In assessing the competence of an internal auditor, an independent CPA most likely would obtain information about the

For which of the following judgments may an independent auditor share responsibility with an entity’s internal auditor who is assessed to be both competent and objective?

The work of internal auditors may affect the independent auditor’s I. Procedures performed in obtaining an understanding of internal control. II. Procedures performed in assessing the risk of material misstatement. III. Substantive procedures performed in gathering direct evidence.

An internal auditor’s work would most likely affect the nature, timing, and extent of an independent CPA’s auditing procedures when the internal auditor’s work relates to assertions about the

During an audit an internal auditor may provide direct assistance to an independent CPA in

When assessing the internal auditor’s competence, the independent CPA should obtain information about the

In assessing the competence and objectivity of an entity’s internal auditor, an independent auditor would least likely consider information obtained from

If the independent auditors decide that the work performed by the internal auditor may have a bearing on their own procedures, they should consider the internal auditor’s

In assessing the objectivity of internal auditors, an independent auditor should

Dunn, CPA, is auditing the financial statements of Taft Co. Taft uses Quick Service Center (QSC) to process its payroll. Price, CPA, is expressing an opinion on a description of the controls placed in operation at QSC regarding the processing of its customers’ payroll transactions. Dunn expects to consider the effects of Price’s report on the Taft engagement. Price’s report should contain a(n)

Payroll Data Co. (PDC) processes payroll transactions for a retailer. Cook, CPA, is engaged to express an opinion on a description of PDC’s internal controls placed in operation as of a specific date. These controls are relevant to the retailer’s internal control, so Cook’s report may be useful in providing the retailer’s independent auditor with information necessary to plan a financial statement audit. Cook’s report should

The auditor who audits the processing of transactions by a service organization may issue a report on controls

Computer Services Company (CSC) processes payroll transactions for schools. Drake, CPA, is engaged to report on CSC’s policies and procedures placed in operation as of a specific date. These policies and procedures are relevant to the schools’ internal control, so Drake’s report will be useful in providing the schools’ independent auditors with information necessary to plan their audits. Drake’s report expressing an opinion on CSC’s policies and procedures placed in operation as of a specific date should contain a(n)

Lake, CPA, is auditing the financial statements of Gill Co. Gill uses the EDP Service Center, Inc. to process its payroll transactions. EDP’s financial statements are audited by Cope, CPA, who recently issued a report on EDP’s internal control. Lake is considering Cope’s report on EDP’s internal control in assessing control risk on the Gill engagement. What is Lake’s responsibility concerning making reference to Cope as a basis, in part, for Lake’s own opinion?