LIJING LU

Auditing
Professor Fuerman
Chapter 7 quiz
1.
In order for an external auditor to complete an audit of a public
company, the entity's management must comply with all of the following
except:
A.
Accept responsibility for the effectiveness of the entity's internal
control over financial reporting.
B.
Evaluate the effectiveness of the entity's internal control over financial
reporting using suitable control criteria.
C.
Support its evaluation with sufficient evidence, including
documentation.
D.
Present an oral assessment of the effectiveness of the entity's internal
control over financial reporting as of the end of the entity's most recent fiscal
year.
2.
An "integrated audit" as stated in Section 404 of the Sarbanes-Oxley
Act means
A.
The auditor must consider the integrated thoughts and ideas of
everyone on the audit staff.
B.
The auditor must conduct two audits, one on the effectiveness of
internal control and one on the financial statements, in an integrated way.
C.
The auditor must integrate the same objectives whether auditing
internal control or auditing the financial statements.
D.
Two independent CPA firms must work together on the audit.
3.
The person in charge of authorizing credit to customers does not
properly understand what constitutes a credit risk. This is an example of
A.
A management deficiency.
B.
A design deficiency.
C.
A deficiency in operation.
D.
This is not an internal control deficiency.
4.
A deficiency that implies that there is a reasonable possibility of
misstatement in the financial statements that is significant but not material
is
A.
A material weakness.
B.
A significant deficiency.
C.
An insignificant deficiency.
D.
A probable deficiency.
5.
A.
B.

The main goal of auditing internal control is

To allow the auditor to fix any internal control deficiencies.
To form an opinion on the ability of internal controls to prevent fraud.

C.
To assure management that internal control is preventing all material
misstatements on the financial statements.
D.
To evaluate the effectiveness of controls over all relevant financial
statement disclosures in the financial statements.
6.
An auditor performing an audit of internal control over financial
reporting would be required to
A.
Rely on the work of internal auditors.
B.
Test all of the entity's internal controls.
C.
Form an opinion on the effectiveness of internal control.
D.
Randomly identify accounts for an audit of internal control.
7.
In determining the extent to which the auditor may use the work of
others in the audit of ICFR, the auditor should do all of the following except:
A.
Test some of the work performed by others to evaluate the quality and
effectiveness of their work.
B.
Evaluate the nature of the controls subjected to the work of others.
C.
Evaluate the competence and objectivity of the individuals who
performed the work.
D.
All of these are required.
8.
Which of the following is not an element of management's assessment
process for the effectiveness of internal control?
A.
Evaluating the likelihood that failure of a control could result in a
misstatement.
B.
Determining the locations and business units to include in the
evaluation.
C.
Determining significant deficiencies and material weaknesses in
controls.
D.
Obtaining the auditor's assessment of the internal control
effectiveness.
9.
A.
B.
C.
D.

Examples of entity-level controls include

Management's risk assessment process.
Controls to monitor results of operations.
The period-end financial reporting process.
All of these are examples of entity-level controls.

10.
A.
B.
C.
D.

ACL is an example of
An EDI software package.
An IT software package.
A Computer-Assisted Audit Technique
A type of networking.