Term
| The quality of an organization's internal controls affects |
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Definition
| the reliability of financial data, the ability of management to make good decisions, and the ability to remain in business. |
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Term
| The tone of internal control typically originates internally with |
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Definition
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Term
| What are three of the seven underlying principles of an effective control environment as developed by COSO? |
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Definition
| integrity and ethical values, management's philosophy and operating style, and authority and responsibility. |
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Term
| Personnel policies and procedures are designed to ensure that the organization |
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Definition
| hires the right people, complies with federal and state laws in its hiring and retention decisions, and has employees that are properly trained and supervised. |
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Term
| The personnel department should be responsible for |
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Definition
| authorization of new employees |
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Term
| What is a good representation of a walk-through? |
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Definition
| the auditor traces three purchasing transactions from the purchase order to the financial statement for observation and understanding. |
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Term
| What are three activities that are control activities implemented in most accounting systems? |
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Definition
| segregation of duties, competent and trustworthy employees, and authorization procedures |
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Term
| A material weakness in the design of the operation of controls discovered in an audit of internal controls results in |
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Definition
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Term
| In a large company, who usually actively performs the monitoring of internal control? |
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Definition
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Term
| a graphic representation of an accounting application that normally identifies key controls that are effective in achieving specific control policies and procedures is |
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Definition
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Term
| The auditor considers internal control in order to determine |
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Definition
| the nature, timing and extent of substantive testing to perform |
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Term
| For the auditor to assess control risk for account balances at less than the maximum |
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Definition
| the external auditor must test and evaluate some of the controls |
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Term
| the risk-based audit approach requires the auditor to identify |
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Definition
| account balances or related disclosures that might be materially misstated, potential causes of the misstatement, and important processes that may affect one or more account balances |
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Term
| An adverse opinion is rendered when the auditor finds |
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Definition
| a material weakness in the internal controls of the client |
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Term
| if the auditor's assessment of an account balance is material, what is the effect on the amount of direct testing performed by the auditor? |
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Definition
| increase in direct testing |
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Term
| When assessing accounting processes which of the following factors is considered pervasive by the auditor when deciding upon the extent of direct testing of account balances? |
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Definition
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Term
| Segregation of duties deals wight he segregation of which functions? |
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Definition
| Authorizing, recording, and physical custody of assets |
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Term
| Public company's audited financial statements are required to be accompanied by |
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Definition
| management's report on internal control over financial reporting and an external audit report on the financial statements and the effectiveness of internal control over financial reporting |
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Term
| The probability that an account balance might be misstated after processes are complete and internal controls have been applied is |
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Definition
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Term
| True or false: tests of controls must be performed for every account |
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Definition
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Term
| What are two correct statements about the performance of test controls? |
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Definition
| some tests of controls must be performed to rely upon controls to reduce substantive testing and the work of the internal auditor can be used to reduce substantive testing. |
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Term
| Directional testing involves testing transactions or balances primarily for which type of error? |
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Definition
| either overstatement or understatement |
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Term
| For the financial statements to be presented in accordance with generally accepted accounting principles, the information included must |
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Definition
| embody the appropriate assertions of management |
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Term
| The primary support of an audit is/are |
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Definition
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Term
| When may audit procedures be performed? |
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Definition
| 1. On the balance sheet date, 2. Prior to the balance sheet date, and 3. subsequent to the balance sheet date |
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Term
| The primary source for evidence to corroborate the existence of pending litigation is |
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Definition
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Term
| performance of audit procedures at an interim date cause the risk of material misstatement occurring between the interim date and the end of the year to |
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Definition
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Term
| What is the role of a concurring partner in an audit engagement? |
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Definition
| to provide a "fresh", quality review of the audit documentation and conclusions and its relationship to the opinion |
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Term
| directional testing creates audit efficiency by taking advantage of the double-entry bookkeeping system. What are three of the primary reasons for this effect? |
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Definition
| a misstatement of some accounts are more likely to occur in one direction than the other, provides evidence on a complementary set of accounts, and some assertions are directional by nature |
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Term
| What is not a very reliable type of audit evidence? |
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Definition
| evidence from the clients organization |
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Term
| What are 3 reliable types of audit evidences? |
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Definition
| evidence derived from a well-controlled system, evidence from independent outside sources, and original documents |
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Term
| The dual purpose audit tests are using as |
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Definition
| tests of controls and tests of account balances |
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