1. UOP ACC 544 Week 6 Quiz (Internal Controls) NEW
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• Question 1 Which of the following payroll control activities
would most effectively ensure that payment is made only for
work performed?
• Question 2 Effective internal control over the payroll
function would include which of the following?
• Question 3 One of the auditor’s objectives in observing the
actual distribution of payroll checks is to determine that every
name on the payroll is that of a bona fide employee. The payroll
observation is an auditing procedure that is generally
performed for which of the following reasons?
• Question 4 A large retail enterprise has established a policy
which requires that the paymaster deliver all unclaimed
payroll checks to the internal auditing department at the end of
each payroll distribution day. This policy was most likely
adopted in order to
• Question 5 In the audit of which of the following types of
profit-oriented enterprises would the auditor be most likely to
place special emphasis on testing the controls over proper
classification of payroll transactions?
• Question 6 The reliance placed on substantive tests in
relation to the reliance placed on internal control varies in a
relationship that is ordinarily
• Question 7 An auditor uses the assessed level of the risk of
2. material misstatement to
• Question 8 The purpose of segregating the duties of hiring
personnel and distributing payroll checks is to separate the
• Question 9 An audit client failed to maintain copies of its
procedures manuals and organizational flowcharts. What
should the auditor do in an audit of financial statements?
• Question 10 As a result of tests of controls, an auditor
assesses control risk too high. This incorrect assessment most
likely occurred because
• Question 11 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
• Question 12 A client erroneously recorded a large purchase
twice. Which of the following controls would be most likely to
detect this error in a timely and efficient manner?
• Question 13 A client’s materials-purchasing cycle begins with
requisitions from user departments and ends with the receipt
of materials and the recognition of a liability. An auditor’s
primary objective in reviewing this cycle is to
• Question 14 The company being audited has an internal
auditor that is both competent and objective. The independent
auditor wants to assign tasks for the internal auditor to
perform. Under these circumstances, the independent auditor
may
• Question 15 An effective control that protects against the
preparation of improper or inaccurate disbursements would be
to require that all checks be
• Question 16 During a financial statement audit an internal
auditor may provide direct assistance to the independent CPA
in performing
• Question 17 When assessing internal auditors' objectivity, an
independent auditor should
• Question 18 Which of the following factors most likely would
3. assist an independent auditor in assessing the objectivity of the
internal auditor?
• Question 19 Which of the following is the most effective
control to detect vouchers that were prepared for the payment
of goods that were not received?
• Question 20 Miller Retailing, Inc. maintains a staff of three
full-time internal auditors who report directly to the controller.
In planning to use the internal auditors to provide assistance
in performing the audit, the independent auditor most likely
will
• Question 21 The accounts payable department receives the
purchase order form to accomplish all of the following except
• Question 22 The independent auditor should acquire an
understanding of the internal audit function as it relates to the
independent auditor’s consideration of internal control
because
• Question 23 For effective internal control purposes, the
vouchers payable department generally should
• Question 24 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?
• Question 25 If the independent auditor decides that the work
performed by internal auditors may have a bearing on the
independent auditor’s own procedures, the independent
auditor should consider the objectivity of the internal auditors.
One method of judging objectivity is to
• Question 26 While obtaining an understanding of a client’s
risk assessment policies, an auditor ordinarily considers how
management
• Question 27 Management’s attitude toward aggressive
financial reporting and its emphasis on meeting projected
profit goals most likely would significantly influence an entity’s
control environment when
4. • Question 28 Which of the following statements is correct
regarding internal control?
• Question 29 Which of the following factors is most relevant
when an auditor considers the client’s organizational structure
in the context of control risk?
• Question 30 Which of the following analytical procedures
most likely would be used during the risk assessment stage of
an audit?
• Question 31 Analytical procedures performed during the risk
assessment phase of an audit should focus on
• Question 32 Which of the following is an analytical procedure
that an auditor most likely would perform when performing
the risk assessment of an audit?
• Question 33 Which of the following most likely would cause
an auditor to consider whether a client’s financial statements
contain material misstatements?
• Question 34 To help plan the nature, timing, and extent of
substantive auditing procedures, preliminary analytical
procedures should focus on
• Question 35 When a customer fails to include a remittance
advice with a payment, it is a common practice for the person
opening the mail to prepare one. Consequently, mail should be
opened by which of the following four company employees?
• Question 36 Which one of the following would the auditor
consider to be an incompatible operation if the cashier receives
remittances from the mailroom?
• Question 37 An auditor’s tests of controls for completeness
for the revenue cycle usually include determining whether
• Question 38 An auditor reviews a client’s accounting policies
and procedures when considering which of the following
planning matters?
• Question 39 An entity with a large volume of customer
remittances by mail could most likely reduce the risk of
employee misappropriation of cash by using
5. • Question 40 An auditor has identified the controller's review
of the bank reconciliation as a control to test. In connection
with this test, the auditor interviews the controller to
understand the specific data reviewed on the reconciliation. In
addition, the auditor verifies that the bank reconciliation is
properly prepared by the accountant and reviewed by the
controller as evidenced by their respective sign-offs. Which of
the following types of audit procedures do these actions
illustrate?
• Question 41 Which of the following best represents a key
control for ensuring sales are properly authorized when
assessing control risks for sales?
• Question 42 An auditor who uses a transaction cycle approach
to assessing control risk most likely would test control
activities related to transactions involving the sale of goods to
customers with the
• Question 43 To determine whether internal control relative
to the revenue cycle of a wholesaling entity is operating
effectively in minimizing the failure to prepare sales invoices,
an auditor most likely would select a sample of transactions
from the population represented by the
• Question 44 For effective internal control, the billing function
should be performed by the
• Question 45 At which point in an ordinary sales transaction
of a wholesaling business would a lack of specific authorization
be of least concern to the auditor in the conduct of an audit?
• Question 46 Which of the following fraudulent activities most
likely could be perpetrated due to the lack of effective internal
control in the revenue cycle?
• Question 47 To verify that all sales transactions for which
shipment has occurred have been recorded, a test of
transactions should be completed on a representative sample
drawn from
• Question 48 After testing a client’s internal control activities,
6. an auditor discovers a number of significant deficiencies in the
operation of a client’s internal control. Under these
circumstances the auditor most likely would
• Question 49 Which of the following is true regarding
significant deficiencies?
• Question 50 During the audit the independent auditor
identified the existence of a significant deficiency in the client’s
internal control and communicated this finding in writing to
the client’s management and to those charged with governance.
The auditor should
• Question 51 Which of the following statements is correct
concerning an auditor’s communication on internal control
related matters noted in an audit?
• Question 52 Which of the following would not typically be a
control relied upon during an audit?
• Question 53 The auditor would be least likely to be concerned
about internal control as it relates to
• Question 54 When preparing a record of a client’s internal
control, the independent auditor sometimes uses a flowchart,
which can best be described as a
• Question 55 One important reason why a CPA, during the
course of an audit engagement, prepares internal control
flowcharts is to
• Question 56 In an audit of financial statements, an auditor’s
primary consideration regarding a control is whether the
control
• Question 57 Effective internal control requires organizational
independence of departments. Organizational independence
would be impaired in which of the following situations?
• Question 58 An auditor would most likely be concerned with
controls that provide reasonable assurance about the
• Question 59 Proper segregation of functional responsibilities
calls for separation of the
• Question 60 Which of the following sets of duties would
7. ordinarily be considered basically incompatible in terms of
good internal control?
• Question 61 A primary objective of procedures performed to
obtain an understanding of internal control is to provide an
auditor with
• Question 62 Which of the following factors is most likely to
affect the extent of the documentation of the auditor’s
understanding of a client’s system of internal controls?
• Question 63 Walk-throughs provide evidence that helps
auditors to
• Question 64 An auditor’s tests of controls over the issuance of
raw materials to production would most likely include
• Question 65 Well functioning internal control for the
inventory/production functions would provide that finished
goods are to be accepted for stock only after presentation of a
completed production order and a(n)
• Question 66 Tests of controls are performed in order to
determine whether
• Question 67 Which of the following would be least likely to be
included in an auditor’s tests of controls?
• Question 68 Which of the following is not a step in an
auditor’s decision to conclude that controls operate effectively?
• Question 69 When an auditor plans to rely on controls that
have changed since they were last tested, which of the following
courses of action would be most appropriate?
• Question 70 Which of the following is a step in an auditor’s
decision to assess the risk of material misstatement at a low
level by relying on controls?
• Question 71 A client maintains a large data center where
access is limited to authorized employees. How may an auditor
best determine the effectiveness of this control activity?
• Question 72 Which of the following is an inherent limitation of
internal controls?
• Question 73 An independent auditor has concluded that the
8. client’s records, procedures, and representation can be relied
upon based on tests made during the year when internal
control was found to be effective. The auditor should test the
records, procedures, and representations again at year-end if
• Question 74 When considering internal control to determine
whether the necessary procedures are designed and operating
effectively, an auditor must
• Question 75 Which of the following is required
documentation in an audit in accordance with generally
accepted auditing standards?
