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WorksheetsAudit and Assurance Quiz
Total questions: 111
Worksheet time: 56mins
There are two types of assurance engagement: reasonable assurance engagements and limited assurance engagements, There are two types of assurance conclusion: Positive and Negative.
For limited assurance engagement, select the appropriate conclusion given?
Positive
Negative
In the context of a statutory audit which THREE of the following are examples of the expectation gap? The belief that:
The auditor's report certifies the financial statements as correct
The auditor's principal duty is to detect fraud
The auditor is employed by the directors
The auditor checks all transactions
For reasonable assurance engagement, select the appropriate conclusion given?
Positive
Negative
For each of the following statements select whether they are true or false. A negative assurance conclusion gives a limited level of assurance
True
False
Which one of the following best describes the concept of assurance?
An assurance firm's high level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
An assurance firm's satisfaction as to the reliability of an assertion being made by one party for the use of another party
A user's satisfaction as to the reliability of an assertion being made by another party
An assurance firm's limited level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
Which two of the following are limitations of the provision of assurance?
Assurance work is carried out by people independent of the entity
Sampling is used in assurance work
Client systems have inherent limitations
Unqualified staff may be used on assurance engagements
The statement: "Suitable criteria can only be identified for assurance engagements relating to financial statements" is true or false?
True
False
For each of the following statements select whether they are true or false. Reasonable assurance is absolute assurance of the correctness of the subject matter
True
False
For Report on profit and cash flow forecasts, select what level of assurance you would expect to be given:
Reasonable
Limited
For Review of financial information, select what level of assurance you would expect to be given:
Reasonable
Limited
Which one of the following is NOT a benefit of an assurance report on Financial information? An assurance report
Enhances the credibility of the information being reported upon
Reduces the risk of management bias in the information being reported upon
Attests to the correctness of the information being reported upon
Draws the attention of the user to deficiencies in the information being reported upon
Which three of the following describe aspects of the expectations gap with respect to the external audit
Users do not understand the meaning of the audit opinion
Users are not aware of the limitations of the audit process
Users do not appreciate that reasonable assurance is a low level of assurance
Users do not understand what the audit process involves
In any assurance engagement there are three parties involved: The responsible party, the practitioner and the user. In respect of given subject matter state which party gathers evidence on the subject matter?
Responsible party
Practitioner
User
Which three of the following are key elements of a general assurance engagement?
A user
A subject matter
Suitable criteria
An assurance file
In any assurance engagement there are three parties involved: The responsible party, the practitioner and the user. In respect of given subject matter state which party prepares the subject matter
Responsible party
Practitioner
User
Which of the following is the most appropriate definition of the external audit?
The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statements of a company are materially misstated.
The external audit is an exercise carried out in order to give an opinion on the effectiveness of a company's internal control system.
The external audit is performed by management to identify areas of deficiency within a company and to make recommendations to mitigate those deficiencies.
The external audit provides negative assurance on the truth and fairness of a company's financial statements
Is the following statement regarding stewardship true or false? Directors are stewards of the investment made by shareholders in a company.
True
False
Which two of the following are elements of an assurance engagement?
(1) A three-party relationship
(2) Suitable criteria
(3) Determination of materiality
(4) An engagement letter
Who normally appoints the external auditors of a company?
Directors
Shareholders
Audit committee
Senior management
The level of assurance provided by an external audit is absolute. Is this statement true or false?
True
False
Limited assurance engagements give what sort of assurance?
Moderate
Low
Which of the following is NOT the element of assurance service?
Sufficient appropriate audit evidence
Suitable criteria
A written report in the appropriate form
A three party relationship consisting of the responsible party, users, and subject matter
Which of the following is NOT a level of assurance provided by an assurance engagement?
Absolute assurance
Negative assurance
Limited assurance
Reasonable assurance
The following conclusions have been reported on two engagements: “The insurance claim presents a true and fair estimate of the amount of inventory lost in the warehouse fire" “The cash flow forecast contains no assumptions that appear unreasonable" Which of the following describes the level of assurance expressed in these conclusions:
(1) negative assurance; (2) No assurance
(1) Positive assurance; (2) No assurance
(1) negative assurance; (2) Negative assurance
(1) Positive assurance; (2) Negative assurance
Is the following statement true or false? “Assurance engagements can relate only to financial measures and results"
True
False
Which of the following is the correct definition of an audit?
The independent examination of and expression of opinion on the financial statements of an entity by a duly appointed auditor in pursuit of that appointment
The process by which the director can state that the FS show a true and fair view.
The examination and certification of opinion on the FS of an entity by a duly appointed auditor in pursuit of that appointment
The process that produces a report stating that nothing has been found wrong in the financial statements.
"Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial statements do not present fairly, in all material respects... in accordance with International Financial Reporting Standards." Which of the following BEST describes the type of assurance provided by this statement?
Positive assurance expressed negatively
Negative assurance expressed positively
High level of assurance expressed negatively
Limited level of assurance expressed negatively
The level of assurance given by an assurance engagement will depend on the type of engagement. Assurance levels are often described as being either: 1. Absolute 2. Reasonable 3. Limited 4-Zero What level of assurance would normally be given to an audit of financial statements?
1
2
3
4
Which of the following best describes professional skepticism?
To disbelieve management professional scepticisms = questioning
To not believe anything that management asserts, without obtaining supporting evidence
To apply a questioning mind to information and evidence
To be prudent and always assume the worst outcome in the case of uncertainty
Who is ultimately responsible for ensuring that the annual financial statements of a listed company are prepared in accordance with IFRS and relevant legislation?
The auditor
The board of directors
The company secretary
The listing exchange
What is the objective of an audit of financial statements of a company?
To protect the interests of minority shareholders
To detect fraud and other irregularities
To assess the effectiveness of the company's performance
To provide assurance on credibility of the financial statements
Which of the following is the most appropriate definition of the external audit?
The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statements of a company are materially misstated.
The external audit is an exercise carried out in order to give an opinion on the effectiveness of a company's internal control system.
The external audit is performed by management to identify areas of deficiency within a company and to make recommendations to mitigate those deficiencies.
The external audit provides negative assurance on the truth and fairness of a company's financial statements
Directors are stewards of the investment made by shareholders in a company. True or false?
True
False
Which two of the following are elements of an assurance engagement?
(1) A three-party relationship
(2) Suitable criteria
(3) Determination of materiality
(4) An engagement letter
A (1) and (2) only
B (1) and (3) only
C (2) and (3) only
D (1) and (4) only
Which of the following are the responsibilities of the external auditor in auditing financial statements?
(1) Maintaining internal controls and preparing financial report;
(2) Providing internal assurance on internal control and financial reports;
(3) Providing internal oversight of the reporting process
A. All of the above
B. None of the above
C. (1) and (2)
D. (2) and (3)
Which THREE of the following are key elements of a general assurance engagement?
Subject matter
Sufficient appropriate evidence
An assurance file
Written report
Which one of the following best describe the concept of assurance?
Assurance refer to an assurance firm’s high level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
Assurance refer to an assurance firm’s satisfaction as to the reliability of an assertion being made by one party for the use of another party
Assurance refer to a user’s satisfaction as to the reliability of an assertion being made by another party
Assurance refer to an assurance firm’s limited level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
Which of the following body is responsible for setting International Standard on Auditing?
IASB
FRC
IAASB
ACCA
Which of the following is a general principle for the auditor to follow?: (1) Compliance with applicable ethical principles; (2) Compliance with International Standard on Auditing; (3) Keeping an attitude of professional skepticism when planning and performing the audit
(1) and (2)
(1) and (3)
(2) and (3)
(1) and (2) and (3)
Which of the following could cause ADVOCACY?
Audit team to be offered a balloon flight entertainment
Tax fee to be based on a percentage of tax saved
Firm to represent Stark in a dispute with the tax authorities
You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.
Which of the following actions should be taken to ensure the firm complies with ACCA’s Code of Ethics and Conduct?
The gift may be accepted as Stark has taken appropriate measures to reduce the value of the gift compared to previous years.
The value of the gift should be assessed to determine whether it is of material value to the financial statements.
The gift should only be accepted if its value is trivial and inconsequential to the recipients.
Only the audit partner and audit manager should accept the gift.
You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specializes in manufacturing luxury mobile phones. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.
Which of the following options best identifies the valid potential threats to independence in the audit of LV Fones and allocates the threat to the most appropriate category?
Familiarity
self-interest
Self-review
intimidation
The audit team being offered a 10% discount on mobile phones of the client.
Which of the following statements is true in accordance with ACCA's Code of Ethics and Conduct?
The audit team can accept the discount as it is on the same terms as that offered to staff
Junior members of the audit team are allowed to accept the discount, but the audit manager and audit partner should not
Unless the value of the discount is trivial and inconsequential to the audit team members, the offer should be declined
The audit team is only allowed to accept a discount of up to 5%
1 Objectivity
2 Independence
3 Confidentiality
4 Professional skepticism
Which TWO of the following are fundamental principles as stated in the ACCA’s Code of Ethics and Conduct?
A 1 and 4
B 1 and 2
C 2 and 3
D 1 and 3
Which of the following are recognised threats to independence and objectivity as identified in ACCA's Code of Ethics and Conduct?
(1) Familiarity (2) Self-interest (3) Integrity (4) Advocacy
(1), (2), (3) and (4)
(1), (2) and (4)
2), (3) and (4)
(2) and (4) only
In which of the following situations would the auditor be able to disclose confidential information about a client?
(1) Disclosure is required by law.
(2) Disclosure is permitted by law but the auditor has not requested the client's permission.
(3) The auditor suspects that the client has committed money-laundering offences
(1) and (2) only
(1) and (3) only
(2) and (3) only
(1), (2) and (3)
Andrew Jones has been the key audit partner of X Co, a public interest entity, for seven years. For how long must he be rotated off the audit as a minimum to comply with ACCA's Code of Ethics and Conduct?
1 year
2 years
3 years
4 years
Who is ultimately responsible for a company's system of internal controls?
External auditors
Board of directors
Internal auditors
Audit committee
AB & Co audits DEF Co. In accordance with ACCA Code of Ethics and Conduct which two of the following circumstances would constitute a threat to objectivity?
team
(1) An employee of AB & Co owns shares in DEF Co but is not part of the audit
(2) The best friend of the engagement partner owns a significant indirect financial interest in DEF Co
(3) The audit manager of DEF Co owns a small number of shares in DEF Co
(4) The husband of the audit partner owns shares in DEF Co
(1) and (2)
(1) and (4)
(2) and (3)
(3) and (4)
Which two of the following are fundamental principles as stated in the ACCA's Code of Ethics and Conduct?
(1) Objectivity
(2) Independence
(3) Confidentiality
(4) Professional skepticism
(1) and (4)
(1) and (2)
(2) and (3)
(1) and (3)
Which of the following principles of ACCA’s code of ethics does this statement mention? “Auditor should not allow bias, conflicts of interest or undue influence of others to override professional or business judgements”
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
Which of the following statement explain for “self-interest” threat?
The auditor’s own personal interest in client which could influence the auditor’s independence
Auditors review work that their own firm has undertaken previously during the audit, e.g. preparing accounts or making a valuation
If the auditors get involved in disputes concerning the client, they may end up acting for or against the client, which undermine the appearance of objectivity
The auditors may be intimidated by a dominant or aggressive atmosphere at the client
In Which of the following situations would the auditor has duty to disclose confidential information about a client?
Disclosure is not required by law
The auditor suspects that the client has committed money-laundering offences
Disclosure is necessary for the public interest
Which of the following threats does this situation create You are senior auditor of Smartwear Ltd. The director of Smartwear have requested you to assist them with the preparation of the statutory financial statements
Self-interest
Self-review
Familiarity
Intimidation
Which THREE of the following are stated fundamental principles of the IESBA code?
Independence
Confidentiality
Objectivity
Integrity
“Auditors have a continuing duty to maintain professional knowledge and skill at the level required and should act diligently and in accordance with applicable technical and professional standards”. Which of the following principles of ACCA’s code of ethics does this statement mention to?
Integrity
Objectivity
Professional competence and due care
Professional behaviour
When gaining an understanding of the specific business operations of an audit client which of the following matters would an auditor need to consider?
Accounting principles and industry specific practices relevant to the client's business
Acquisitions or disposals of the client's business activities
Leasing of property, plant or equipment for use in the client's business
Products or services and markets of the client's business
Which of the following procedures must the auditor use to obtain an understanding of the entity and its environment in accordance with ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment?
(1) Analytical procedures
(2) Inquiry
(3) Confirmation
(4) Reperformance
A (1), (2) and (3)
B (1) and (2)
C (2), (3) and (4)
What are the two elements of the risk of material misstatement at the assertion level?
Inherent risk and detection risk
Audit risk and detection risk
Inherent risk and control risk
Detection risk and control
'Audit risk' represents the risk that the auditor will give an inappropriate opinion on the financial statements when the financial statements are materially misstated. Which of the following categories of risk can be controlled by the auditor? Category of risk:
(1) Control risk (2) Detection risk (3) Sampling risk
A (1) and (2)
B (2) only
C (1) and (3)
D (2) and (3)
The definition of the risk of material misstatement is 'Inherent Risk × Control Risk × Detection Risk'. Is this statement true or false?
True
False
Which of the following statements about materiality are correct?
(1) Information is material if its omission or misstatement could influence the economic decisions of users of the financial statements.
(2) Materiality is based on the auditor's experience and judgment.
(3) Materiality is always based on revenue.
(4) Materiality should only be calculated at the planning stage of the audit.
A (1), (2) and (3)
B (1), (3) and (4)
C (1) and (2)
D (2) and (4)
Performance materiality levels are less than the materiality for the financial statements as a whole. Is this statement true or false?
True
False
Is the following statement regarding the interim audit true or false? The higher the risk of material misstatement the more likely it is that the auditor will decide to perform substantive procedures during the interim audit rather than at the period end.
True
False
Who is responsible for the prevention and detection of fraud?
Internal auditors
External auditors
Those charged with governance and management
The audit committee
The auditor of A Co wishes to reduce audit risk. Which of the following actions could the auditor take to achieve this?
(1) Increase sample sizes
(2) Reduce control risk
(3) Assign more experienced staff to the engagement team
A (1) only
B (2) only
C (1) and (3)
D (2) and (3)
Which of the following example illustrates Inherent Risk?
Director’s pay related to company’s profitability
The company has a high turnover staff in the accounting department
Senior management regularly override the internal control system
Audit staff are inexperienced
Which of the following example illustrates Control Risk?
The financial statements include complex transactions
The company has recently listed on the local stock exchange with high profit expectations from analysts
Senior management regularly override the internal control system
Sample sizes have been calculated incorrectly by the auditor and are too small
Which of the following case could lead to the assessment that inherent risk is lower than normal?
The company operates in a profit-related pay scheme
The business of the company is cash-based
Financial statements contain balances with straightforward financial accounting
For each of the following statements about materiality, Which ONE of the following statement is true?
Materiality only depends on the size of the error in the context of its omission or misstatement.
Materiality should be considered when planning audit procedures and when evaluating discovered misstatements.
Materiality must be expressed as a proportion of asset
Materiality will not influence the audit opinion given
Which of the following is true regarding Materiality?
Materiality is always expressed as a proportion of profits
Materiality is always expressed as a proportion of revenue
Materiality should be considered when planning audit procedures and when evaluating discovered misstatements
For each of the following statements about concept of materiality, Which ONE of the following statement is false?
Materiality should be calculated at the planning stage of all audits
Materiality can be expressed as a proportion of asset
Materiality will influence the audit opinion given
Once established, the materiality level initially set cannot be revised during the course of the audit
Which of the following is NOT a reason for obtaining an understanding about the entity and its environment?
To identify and assess the risks of material misstatement in the financial statements
To enable the auditor to design and perform further audit procedures
To provide a frame of reference for exercising audit judgement, for example, when setting audit materiality
To identify the relevant internal control and test its operating effectiveness
Two types of procedures used in gathering evidence are tests of controls and substantive procedures. Sometimes, a specific procedure can serve as both a test of control and substantive procedure. If sales for the year are compared to the budget, which ONE of the type of procedures is used to illustrate?
Test of control
Substantive procedure
Both a test of control and a substantive procedure
Neither a test of control nor a substantive procedure
Which TWO of the following would be classified as substantive procedures?
Analytical procedures
Tests of control
Walk-through tests
Tests of details.
Which THREE of the following are procedures that could be used by auditors to provide evidence relating to a balance in the financial statements?
Analytical procedures
Tests of control
Walk-through tests
Tests of details
Which of the following would normally be included in the audit plan?
Reporting objectives
Industry-specific financial reporting requirements
Nature, timing, and the extent of planned risk assessment procedures
Which of the following statements are correct with regard to the relationship between the audit plan and the audit strategy for an external audit engagement?
(1) The audit plan should be developed before the audit strategy is established.
(2) The audit plan and the audit strategy should be established and developed at the same time.
(3) The overall audit strategy should be more detailed than the audit plan.
(4) The audit strategy should be established before the audit plan is developed.
A (1) and (3)
B (2) only
C (3) and (4)
D (4) only
What are the purposes of planning the audit?
(1) To ensure appropriate attention is devoted to different areas of the audit (2) To identify potential problem areas
(3) To facilitate delegation of work to audit team members
(4) To ensure the audit is completed within budget and time restraints
A (1), (2), (3) and (4)
B (1), (3) and (4)
C (1), (2) and (3)
D (2) and (3)
Which of the following factors influence the form and content of audit working papers?
(1) Risks of material misstatement
(2) Exceptions identified
(3) Nature of the package used for documentation
(4) Cost to the audit
A (1), (2) and (4)
B (1), (3) and (4)
C (1) and (2)
D (2) and (4)
Is the following statement regarding audit evidence true or false? Appropriateness is the measure of the quality of audit evidence.
True
False
Which of the following is assertions used by auditor about class of transaction?
Existence
Cut-off
Right and obligation
Which of the following assertions are NOT relevant to the audit of tangible non-current assets?
Existence
Occurrence
Classification
Presentation
Right and obligation
The following test are carried out by an auditor: “Tracing non-current asset which have been observed in use back to the non-current asset register”
Existence
Completeness
Classification
Right and obligation
Which of the following is NOT objective of audit planning?
To determine the scope of the engagement and sign the engagement letter
To identify and resolve potential problems on a timely basis.
To ensure appropriate attention to important areas of the audit
To select appropriate team members and assign work to them
Which of the following is NOT the reason why auditor need to record their work in working papers?
To confirm the terms of the engagement
To help the audit team to plan and perform the audit
To retain a record of matters of continuing significance to the engagement
To enable the conduct of quality control reviews and inspections
Which of the following is likely to be kept on a permanent audit file?
Supporting documents to demonstrate the audit adjustment
Audit manager’s review notes
Previous year’s signed financial statements
This year’s trial balances, accounting ledgers
Which of the below factors influence the auditor's judgement regarding the reliability of the evidence obtained?
The source of audit evidence
The materiality of the account
The volume of audit evidence obtained
The size of the account
In respect of an audit engagement, which of the following is the least persuasive method of gathering evidence?
Inspection of a supplier’s invoice
A receivables confirmation letter sent directly from the customers to the auditor
Recalculation of depreciation
Inspection of a sales invoice
Which of the following is true regarding audit evidence?
Audit evidence from internal sources is more reliable than that obtained from external sources
A sales invoice is more reliable than a purchase invoices as it is internally generated
Original documents are more reliable than copies
A bank statement is less reliable than the cash at bank nominal ledger account as it is generated by third party
Which one of the following assertions is the auditor LEAST concerned with when testing a non-current asset balance?
Existence
Rights and Obligations
Completeness
Cut-off
Which of the following procedures would provide evidence of Rights and Obligations of motor vehicles?
Vouching a sample of motor vehicles in the asset register to registration documents
Physical inspection of motor vehicles
Recalculation of the depreciation of motor vehicles charge in the period
Recalculation of gain or loss from disposal of motor vehicles during the year
What is the purpose the following procedures will provide appropriate audit evidence in respect of the completeness of non-current assets?
For a sample of non-current assets listed on the non-current assets register, physically inspect the asset.
For a sample of assets on the assets register, recalculate the net book values in accordance with the entity's accounting policies
For a sample of assets on the assets register, inspect relevant purchase invoices or deeds
For a sample of assets selected by physical inspection, agree that they are listed on the non-current assets register
Auditors obtain evidence using procedures set out in ISA (UK) 500, Audit Evidence. The auditor examines a title deed to confirm that the company has ownership of a plot of land. Which ONE of the following procedures is being used?
Inspection
Observation
. Inquiry
Re-performance
The auditor of Mondays Ltd is performing a test to ensure that there are no omissions from the non- current asset register. In respect of which ONE of the following assertions will this procedure provide audit evidence?
Existence
Accuracy, valuation and allocation
Completeness
Classificatio
Which of the following is NOT an inherent limitation of internal control systems?
Insufficient segregation of duties
Possibility that employees may collude together fraudulently
Possibility of human error in undertaking tasks
Which of the following controls of a sales system ensure that all goods despatched are completely and accurately invoiced?
Good despatched notes are matched to sales invoices
Sales invoices are sequentially numbered
Sales invoices are matched to customer orders
ISA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment sets out the five components of internal control. Which of the following is NOT set out as a component of internal control within ISA 315?
Control environment
The information system relevant to financial reporting
Human resource policies and practices
Which of the following procedures are TESTS OF CONTROL an auditor should perform in testing the inventory cycle of their client whilst attending the inventory count?
(1) Observe whether the client’s staff are following the inventory count instructions
(2) Review inventory present in the warehouse for evidence of damage or obsolescence (3) Obtain a sample of the last goods received notes and goods despatched notes and follow through to ensure inclusion in the correct accounting period
(4) Inspect and review management’s inventory count instructions
2 and 3
1 and 4
1 and 2
3 and 4
Is the following statement regarding the assurance provided by an internal control system true or false? An effective internal control system provides the auditor with absolute assurance that control objectives have been achieved.
True
False
Which of the following methods of recording an accounting and controls system is a series of questions used to determine whether controls exist which meet specific control objectives?
Internal control questionnaire
Internal control evaluation questionnaire
Flowchart
One of the control objectives of the sales system of B Co is to ensure that goods and services are sold to credit-worthy customers. Which of the following control activities would assist B Co in achieving this objective?
All sales orders are based on authorized price lists.
Credit limits are checked before sales orders are accepted.
Overdue debts are chased each month by the credit controller.
The aged-debt listing is reviewed by the finance director on a monthly basis
Which of the following controls helps to ensure that payroll payments are only made to bona fide employees?
(1) Personnel records maintained for all employees
(2) Comparison of bank transfer listing with payroll
(3) Segregation of duties between staff involved in human resources and payroll functions
(4) Reperformance of the calculation of a sample of payroll deductions
A. (1) and (2)
B. (1) and (3)
C. (2) and (4)
D. (3) and (4)
B Co maintains perpetual inventory records. Which of the following control activities would contribute to the auditor's confidence that inventory recorded in the financial statements exists?
(1) Procedures to identify obsolete and damaged inventory
(2) Physical safeguards to protect inventory from theft
(3) Sequential numbering of goods dispatched notes
(4) Reconciliation of inventory records to results of inventory counts
A. (1) and (2)
B. (1) and (3)
C. (2) and (3)
D. (2) and (4)
Which of the following is not a test of control?
Inspection of purchase order documentation to confirm that it has been authorised
Review of monthly bank reconciliations performed by the audit client
Examination of purchase invoices for evidence of mathematical accuracy checks
Agreement of the cost of non-current asset additions to purchase documentation
ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment sets out the five components of internal control. Which of the following is not set out as a component of internal control. Which of the following is not set out as a component of internal control within ISA 315?
A. Control environment
B. The information system relevant to financial reporting
C. Human resource policies and practices
Which of the following is NOT a component of internal control?
A. Control risk
B. The entity’s risk assessment procedures
C. Control activities
D. Control environment
2. Which of the following is NOT a control activity?
A. Physical control
B. The control environment
C. Reconciliations and comparisons
D. Authorization
Which of the following represent inherent limitations of a system of internal controls?
Lack of controls over the purchase system
Lack of staff to ensure segregation of duties
The possibility that staff members will collude in fraud
Which of the following is true regarding to internal control system in small entities?
Smaller companies are more likely to be successful in the implementation of segregation of duties controls.
Management override is more likely to take place in smaller companies
Smaller companies usually maintain internal audit function
Which of the following is NOT true regarding limitation of any system of internal controls?
The cost of implementing controls may be more expensive than the cost of any potential risk arising.
The effectiveness of many controls rely on the integrity of those applying them
Internal controls are only applied to material items.
Standard controls may not be designed to deal with unusual transactions
