University of Tasmania

BFA 713

NEW MCQs

CHAPTER 7

1)Assessing control risk at less than high involves all of the following except:

2. Obtaining an understanding of the internal control and assessing control risk:
3. The conclusion reached as a result of assessing control risk is referred to as the:
4. An auditor assesses the level of control risk to:
5. How does the extent of substantive tests required to constitute sufficient appropriate audit evidence vary with the auditor’s assessment of control risk?
6. The ultimate purpose of assessing control risk is to contribute to the auditor’s evaluation of the:
7. Assessing control risk at less than high would most likely involve:
8. A primary purpose of internal controls is to:
9. When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:
10. Which of the following would be least likely to suggest to an auditor that the client’s management may have overridden the internal control?
11. In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance that:
12. Of the following statements about an internal control, which one is not valid?
13. Which of the following statements about internal control is correct?
14. Which of the following statements is one of the overriding principles of internal control?
15. Virginia samuels, the purchasing officer of handyman wholesalers pty ltd (handyman), has a relative who owns a retail hardware store. Virginia arranged for hardware to be delivered by manufacturers to the retail store on a cod basis, thereby enabling her relative to buy at wholesale prices in handyman’s name. Virginia was probably able to accomplish this because of handyman’s poor internal control for:

16. A company policy should clearly indicate that defective merchandise returned by customers is to be delivered to the:
17. An effective internal control for the payroll function would generally include which of the following?

18. An auditor reviews a client’s payroll procedures. The auditor would consider the internal control to be less than effective if a payroll department supervisor was assigned the responsibility for:

19. 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:

20. The control environment component of internal controls includes all of the following except:

21. The risk assessment component of internal controls refers to:

22. Which of the following is not one of the five elements of internal control?

23. The internal control environment includes all of the following except: .
24. A well-prepared flowchart should make it easier for the auditor to:
25. A flowchart is most frequently used by an auditor in connection with the:
26. An advantage of using systems flowcharts to document information about internal control instead of using internal control questionnaires is that systems flowcharts:

27. For a complex system, auditors are least likely to use which of the following when documenting their understanding of internal controls?
28. Walk-throughs usually involve all of the following audit procedures except:
29. Which of the following situations is not a reason to assess control risk as high?

30. In obtaining an understanding of the internal control policies and procedures that are relevant to audit planning, the auditor should perform procedures to provide sufficient knowledge of:
31. Which of the following is not a medium that can normally be used by an auditor to record information concerning a client’s internal control?
32. When the auditor has assessed the level of control risk at less than high, the auditor should document:
33. Procedures directed towards obtaining evidence concerning the effectiveness of the design or operation of an internal control policy or procedure are referred to as:
34. The auditor observes client employees in obtaining an understanding of the internal control in order to:
35. The following are steps in the audit process:

36. The auditor’s understanding of the client’s internal control is documented to substantiate:
37. After the auditor has prepared a flowchart of the accounting system and control procedures surrounding sales, and assessed the design of the system, the auditor would perform tests of controls for all control procedures:
38. Which of the following internal control features would an auditor be least likely to review?.
39. When considering the internal control for inventory with respect to segregation of duties, an auditor would be least likely to:
40. In the weekly computer run to prepare payroll cheques, a cheque was printed for an employee whose employment was terminated the previous week. Which of the following controls, if properly used, would have been most effective in preventing this error or ensuring its prompt detection?

41. The auditor obtains evidence supporting the notion that proper segregation of duties exists by:

42. Which of the following procedures is essential to determine whether effective internal control policies and procedures have been prescribed and are being followed?

43. Which of the following input controls is a numeric value computed to provide assurance that the original input value does not contain a transcription error? .
44. A limit test is a:
45. An IT input control is designed to ensure that:
46. For good internal control, which of the following functions should not be the responsibility of the cashier?
47. In updating a computerised accounts receivable file, which one of the following would be used as a batch control to verify the accuracy of the postings of cash receipts remittances?
48. After obtaining an initial understanding of a client’s it controls, an auditor may decide not to perform tests of controls related to the control procedures within the it section of the client’s internal control. Which of the following justifications would not be a valid reason for choosing to omit tests of controls?
49. Which of the following computer documentation would an auditor most likely utilise in obtaining an understanding of internal control?
50. Which of the following situations most likely represents a weakness in it internal control?
51. Which of the following would lessen the effectiveness of the internal control in a computer system?
52. Which of the following information is likely to be least important to an auditor who is reviewing the internal control of the data processing function?
53. Which of the following information is likely to be of least importance to an auditor in obtaining an understanding of the internal control?.
54. A procedural control used in the management of a computer centre to minimise the possibility of data or program file destruction through operator error includes:
55. The use of a header label is most likely to prevent errors by the:
56. When erroneous data are detected by computer program controls, such data may be excluded from processing and printed on an error report. The error report should most probably be reviewed and followed up by the:
57. Internal control procedures within the it activity may leave no visible evidence indicating that the procedures were performed. In such instances, the auditor should test these controls by:
58. Totals of amounts in computer-record data fields that are not usually added, but are used only for data-processing control purposes, are called:
59. Which of the following activities would most likely be performed in the IT department?

60. Which of the following is an example of a check digit?

61. An input control is designed to ensure that:
62. Gift stores Ltd has a fully integrated it accounting system and is planning to issue credit cards to creditworthy customers. To strengthen the internal control by making it difficult for one to fraudulently create a customer account number, a check digit should be placed:
63. The completeness of IT-generated sales figures can be tested by comparing the number of items listed on the daily sales report with the number of items billed on the actual invoices. This process uses:

64. If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll IT application?

65. If a control total were to be calculated on each of the following data items, which would best be identified as a hash total for a payroll IT application?

66. One of the major problems with it systems is that incompatible functions may be performed by the same individual. One compensating control for this is the use of:
67. In which of the following situations would an auditor most likely use a strategy of reliance on internal control?