Question 1

Of the following statements about an internal control, which one is not valid?

Accepted Answer

A)  No one person should be responsible for the custodial responsibility and the recording responsibility for an asset.
B)  Transactions must be properly authorised before such transactions are processed.
C)  Because of the cost-benefit relationship, a client may apply control procedures on a test basis.
D)  Control procedures reasonably ensure that collusion among employees cannot occur.E) None of the above
F) A) and D)

Question 2

Which of the following would be least likely to suggest to an auditor that the client's management may have overridden the internal control?

Accepted Answer

A)  Differences are always disclosed on a computer exception report.
B)  Management does not correct internal control deficiencies that it knows about.
C)  There have been two new financial controllers this year.
D)  There are numerous delays in preparing timely internal financial reports.E) C) and D)
F) None of the above A

Question 3

A well-prepared flowchart should make it easier for the auditor to:

Accepted Answer

A)  prepare audit procedure manuals.
B)  prepare detailed job descriptions.
C)  perform walk-throughs.
D)  assess the degree of accuracy of financial data.E) All of the above
F) A) and D)

Question 4

Which of the following statements about internal control is correct?

Accepted Answer

A)  The establishment and maintenance of internal control is an important responsibility of the internal auditor.
B)  Properly maintained internal control reasonably ensures that collusion among employees cannot occur.
C)  The cost-benefit relationship is a primary criterion that should be considered in designing internal control.
D)  Exceptionally strong internal control is enough for the auditor to eliminate substantive tests on a significant account balance.E) A) and B)
F) A) and C)

Question 5

Which of the following activities would most likely be performed in the IT department?

Accepted Answer

A)  Initiation of changes to master records.
B)  Conversion of information to machine-readable form.
C)  Correction of transactional errors.
D)  Initiation of changes to existing applications.E) B) and D)
F) A) and C)

Question 6

Which of the following statements is one of the overriding principles of internal control?

Accepted Answer

A)  Responsibility for accounting and financial duties should be assigned to one responsible officer.
B)  Responsibility for the performance of each duty must be fixed.
C)  Responsibility for the accounting duties must be borne by the audit committee of the company.
D)  All of the options listed here are correctE) A) and D)
F) A) and C)

Question 7

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?

Accepted Answer

A)  A control total for hours worked, prepared from time-cards collected by the timekeeping department and compared to the payroll sheets.
B)  Requiring the accounting department to account for all pre-numbered cheques issued to the IT department for the processing of the payroll.
C)  The use of check digits on employee numbers.
D)  The use of a header label on the payroll input sheet.E) A) and D)
F) A) and C)

Question 8

Totals of amounts in computer-record data fields that are not usually added, but are used only for data-processing control purposes, are called:

Accepted Answer

A)  record totals.
B)  hash totals.
C)  processing data totals.
D)  field totals.E) B) and C)
F) A) and D)

Question 9

Obtaining an understanding of the internal control and assessing control risk:

Accepted Answer

A)  may be performed concurrently in an audit.
B)  needs to be documented only if the assessed level of control risk is less than high.
C)  is possible but not necessary in performing an audit.
D)  are necessarily sequential audit steps.E) A) and B)
F) None of the above

Question 10

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?

Accepted Answer

A)  Hash total.
B)  Financial total.
C)  Encryption.
D)  Check digit.E) A) and B)
F) A) and C) D

Question 11

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?

Accepted Answer

A)  The sum of the cash deposits, plus the discounts, less the sales returns.
B)  The sum of the cash deposits.
C)  The sum of the cash deposits, less the discounts taken by customers.
D)  The sum of the cash deposits, plus the discounts taken by customers.E) B) and D)
F) None of the above D

Question 12

A limit test is a:

Accepted Answer

A)  test to ensure that a numerical value does not exceed some predetermined value.
B)  check to ensure that the value in a field falls within an allowable range of values.
C)  check to ensure that the data in a field have the proper arithmetic sign.
D)  check on a field to ensure that it contains either all numeric or alphabetic characters.E) A) and B)
F) All of the above

Question 13

For good internal control, which of the following functions should not be the responsibility of the cashier?

Accepted Answer

A)  Data processing.
B)  Receiving of cash.
C)  Custody of securities.
D)  Banking of cash.E) B) and C)
F) C) and D)

Question 14

In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance that:

Accepted Answer

A)  controls have not been circumvented by collusion.
B)  misstatements have been prevented or detected.
C)  operational efficiency has been achieved in accordance with management plans.
D)  management cannot override the system.E) A) and C)
F) A) and B)

Question 15

The following are steps in the audit process: I.prepare flowchart.
II) gather exhibits of all documents.
III) interview personnel.
The most logical sequence of steps is:

Accepted Answer

A)  I, II, III.
B)  I, III, II.
C)  III, II, I.
D)  II, I, III.E) None of the above
F) B) and D)

Question 16

The use of a header label is most likely to prevent errors by the:

Accepted Answer

A)  computer operator.
B)  key entry operator.
C)  computer programmer.
D)  maintenance technician.E) A) and D)
F) C) and D)

Question 17

Procedures directed towards obtaining evidence concerning the effectiveness of the design or operation of an internal control policy or procedure are referred to as:

Accepted Answer

A)  analytical procedures.
B)  substantive tests.
C)  tests of controls.
D)  confirmations.E) A) and B)
F) None of the above

Question 18

Which of the following situations most likely represents a weakness in IT internal control?

Accepted Answer

A)  The accounts payable clerk prepares data for computer processing and enters the data into the computer.
B)  The systems analyst reviews output and controls the distribution of output from the IT department.
C)  The control clerk establishes control over data received by the IT department and reconciles control totals after processing.
D)  The systems programmer designs the operating and control functions of programs and participates in testing operating systems.E) B) and C)
F) A) and B)

Question 19

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?

Accepted Answer

A)  Narrative memorandum.
B)  Procedures manual.
C)  Flowchart.
D)  None of the given answers is correct.E) A) and D)
F) A) and C)

Question 20

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?

Accepted Answer

A)  Hours worked.
B)  Employee's identification number.
C)  Number of employees.
D)  Gross pay.E) B) and C)
F) None of the above

Exam 7: Understanding and Assessing Internal Control

Of the following statements about an internal control, which one is not valid?

Correct AnswerverifiedShow Answer

Which of the following would be least likely to suggest to an auditor that the client's management may have overridden the internal control?

Correct AnswerverifiedA

A well-prepared flowchart should make it easier for the auditor to:

Correct AnswerverifiedShow Answer

Which of the following statements about internal control is correct?

Correct AnswerverifiedShow Answer

Which of the following activities would most likely be performed in the IT department?

Correct AnswerverifiedShow Answer

Which of the following statements is one of the overriding principles of internal control?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Totals of amounts in computer-record data fields that are not usually added, but are used only for data-processing control purposes, are called:

Correct AnswerverifiedShow Answer

Obtaining an understanding of the internal control and assessing control risk:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedD

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?

Correct AnswerverifiedD

A limit test is a:

Correct AnswerverifiedShow Answer

For good internal control, which of the following functions should not be the responsibility of the cashier?

Correct AnswerverifiedShow Answer

In assessing control risk, the auditor is basically concerned that the system provides reasonable assurance that:

Correct AnswerverifiedShow Answer

The following are steps in the audit process: I.prepare flowchart. II) gather exhibits of all documents. III) interview personnel. The most logical sequence of steps is:

Correct AnswerverifiedShow Answer

The use of a header label is most likely to prevent errors by the:

Correct AnswerverifiedShow Answer

Procedures directed towards obtaining evidence concerning the effectiveness of the design or operation of an internal control policy or procedure are referred to as:

Correct AnswerverifiedShow Answer

Which of the following situations most likely represents a weakness in IT internal control?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified