Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Undeleted > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

Auditors obtain an understanding of nonpublic entity’s internal control for the primary purpose of…

A

Determining the nature, extent, and timing of audit procedures to be performed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Internal controls are designed to achieve company objectives in what areas?

A
  1. Safeguarding of Assets
  2. Reliability of Financial Reporting
  3. Compliance with Laws and Regultions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

The five major components of internal control (COSO framework)

A
  1. Control Environment
  2. Risk Assessment
  3. Control Activities
  4. Information & Communication
  5. Monitoring
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a proper reason for NOT conducting tests of controls for nonpublic companies?

A

The procedures require more audit effort than the projected benefits to be obtained from lowering the control risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

For nonpublic companies with preliminary control risk assessments set at high, auditors are likely to…

A

Complete little or no tests of controls.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the proper sequence of audit steps that come after an understanding and documenting the entity’s internal control

A
  1. Assess Control Risk
  2. Test of Controls
  3. Reassess Control Risk
  4. Determine Extent of Substantive Testing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What form is document is required to document internal controls?

A

No one particular form of documentation is necessary, and the extent of documentation may vary.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

An report from a service auditor should include what?

A

An opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The auditor should report what about internal controls to the audit committee or others charged with governance?

A

Significant deficiencies

Material Weaknesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

List 3 general controls

A
  1. Backup and disaster recovery controls
  2. Password protection on the central server
  3. Requiring change authorization forms on all program software
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

A reliance strategy is chosen when the auditor…

A
  1. Plans on conducting test of controls

2. Has set the control risk at a lower level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Understanding each of the components of internal control provides knowledge about…

A

The design of Internal Controls

Factors that affect the risk of material misstatement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The effectiveness of internal control is reduced by…

A

Human errors or mistakes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

In order to be able to set controls risk at a lower level, the auditor must do all of the following…

A
  1. Identify specific controls that will be relied upon
  2. Perform test of controls
  3. Conclude on the achieved level of control risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

The auditor may document the achieved level of control risk using the following…

A
  1. Structured working papers
  2. Internal Control Questionnaire
  3. A Memorandum
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Four categories of Control Activities

A
  1. Performance Reviews
  2. Information Processing Controls
  3. Physical Controls
  4. Segregation of Duties
17
Q

What audit procedure does an auditor typically use to develop an understanding of control activities?

A

Walkthroughs

18
Q

What forms can an auditor use to document an understanding of internal controls?

A
  1. Procedure Manuals/Organization Chart
  2. Internal Control Questionnaires
  3. Flowcharts
  4. Narrative Description
19
Q

A memo to document internal controls is typically used for what size or organization?

A

Smaller

20
Q

How is a complex system of internal controls typically documented?

A

Internal Control Questionnaire

21
Q

What are the top 3 reasons cited causes of fraud?

A
  1. Inadequate controls
  2. Management Override
  3. Inadequate oversight
22
Q

Name 3 limitations to internal controls

A
  1. Management override
  2. Human Errors or Mistakes
  3. Collusion
23
Q

Type 1 Service auditor report states what?

A

An opinion on management’s description and assertions on the design of the system and related controls

24
Q

Type 2 Service auditor report states what?

A

Everything from a Type 1 report and opinion on the operating effectiveness of the controls.

25
Q

An auditor’s primary consideration regarding an entity’s internal controls is whether they…

A

Affect the financial statement assertions

26
Q

The cost-benefit relationship is a primary criterion that should be considered in designing an internal control system (T/F).

A

True

27
Q

Internal control is a process designed to provide reasonable assurance regarding the achievement of what?

A
  1. Effectiveness and Efficiency of Operations
  2. Reliability of financial reporting
  3. Compliance with applicable laws and regulations

Undeleted (57 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions