Opaud 4

• Which of the following is not one of the three primary objectives of effective internal control?

  • Reliability of financial reporting.
  • B. Efficiency and effectiveness of operations.
  • C. Compliance with laws and regulations.
  • D. Assurance of elimination of business risk.
• C. Yes No Yes

  
• 3. Which of the following statements concerning the relevance of various types of controls to a financial

  statement audit is correct?

  
• 4. An auditor should consider two key issues when obtaining an understanding of a client's internal

  controls. These issues are

  • The effectiveness and efficiency of the controls.
  • B. The frequency and effectiveness of the controls.
  • C. The design and implementation of the controls.
  • D. The implementation and efficiency of the controls.

  The design and implementation of the controls.
• 5. Authorizations can be either general or specific. Which of the following is not an example of a general

  authorization?

  • Automatic reorder points for raw materials inventory.
  • B. A sales manager's authorization for a sales return.
  • C. Credit limits for various classes of transactions
  • D. A sales price list for merchandise.
  • B. A sales manager's authorization for a sales return.
• 6. An auditor should obtain sufficient knowledge of an entity's information system, including the related

  business processes relevant to financial reporting, to understand the

  • Policies used to detect the concealment of fraud.
  • B. Process used to prepare significant accounting estimates.
  • C. Safeguards used to limit access to computer facilities.
  • D. Procedures used to assure proper authorization of transactions.
  • Process used to prepare significant accounting estimates.
• 7. Which of the following controls most likely would provide reasonable assurance that all credit sales

  transactions of an entity are recorded?

  
• 8. Physical control used to minimize incompatible functions at work refers to

  • Segregation of Duties
  • B. Accounting Records
  • C. Supervision
  • D. Independent Verification
  • Segregation of Duties
• 9. Physical control used to capture the economic essence of transactions and provide an audit trail of

  economic events refers to

  • Segregation of Duties
  • C. Supervision
  • B. Accounting Records
  • D. Access Control

  Accounting Records
• 10. Auditors assessing the integrity of the organization's management and using investigative agencies to report on the backgrounds of key managers is one of the five components of the COSO framework.

  • Control environment
  • B. Risk assessment
  • C. Monitoring
  • D. Information and communication
  • Control environment
• 11. The authorization of a transaction to ensure that all material transactions processed by the information system are valid and in accordance with management's objectives is one of the five components of the COSO Framework.

  • Control environment
  • B. Control activities
  • C. Monitoring
  • D. Information and communication
  • B. Control activities
• 12. The classes of transactions that are material to the financial statements and how those transactions  are initiated is one of the five components of the COSO framework.

  • Control environment
  • B. Risk assessment
  • C. Control activities
  • D. Information and communication
  • D. Information and communication
• 13. A change in the organizational structure resulting in the reduction and/or reallocation of personnel  such that business operations and transaction processing are affected is one of the five components of the COS Framework.

  • Control environment
  • B. Risk assessment
  • C. Monitoring
  • D. Information and communication

  Risk assessment
• 14. Physical control used to ensure that only authorized personnel have access to the firm's assets refers to

  • Segregation of Duties
  • B. Accounting Records
  • C. Access control
  • D. Independent Verification

  Access control
• 15. Every system of internal control has limitations on its effectiveness. These include

  • The concept that the company should establish and maintain a system of internal control.
  • B. The possibility of error---no system is perfect.
  • C. Circumvention---personnel may circumvent the system through collusion.
  • D. Band C only.

  Band C only.
• 16. In the COSO enterprise risk management organization's overall tone relates most closely to: framework,

  • Internal environment
  • B. Objective setting
  • C. Event identification
  • D. Monitoring

  Internal environment
• Miguel and Rafaela were developing a risk management plan for their company following the COSO framework. One of the company's goals is to have sufficient cash available for operations; that goal had been difficult to achieve due to seasonal fluctuations in sales. To reduce that risk, Miguel and Rafaela recommended their company invest some cash in short-term securities that could be liquidated quickly and easily. Which element of the COSO framework is most related to their recommendation

  
• 18. In a conversation about risk management, Miguel and Rafaela produced a ranked list of their company's risk exposures. The ranked list is most closely related to which element of the COSO framework?

  • Information and communication
  • B. Risk assessment
  • C. Risk response
  • D. Monitoring

  Risk assessment
• 19. COSO has published integrated frameworks for both internal control and for enterprise risk  management. Which of the following statements about the frameworks is most true?

  • The internal control framework is more useful than the enterprise risk management framework.
  • B. The enterprise risk management framework is more useful than the internal control framework.
  • C. Management attitudes are an element of both frameworks.
  • D. Both frameworks are required.


  Management attitudes are an element of both frameworks.
• 20. Which of the following best pairs an element of the COSO enterprise risk management framework  with an example of that element?

  • Objective setting, determining which elements of the CoSo framework to use
  • B. Event identification, identifying needed internal controls
  • C. Risk assessment, annual management retreats focused on the ERM plan
  • D. Risk response, diversifying risk by expanding internationally

  Risk response, diversifying risk by expanding internationally
• 21. One of the steps in the generalized model of business process management discussed in the text

  focuses on collecting process- related data. If Laurie and Milton are concerned about the risks created by

  inefficiency in the company's current fixed asset purchasing process, they could collect data related to:

  I. the average length of time between an order for a fixed asset and its delivery,

  Il. the costs incurred in the fixed asset purchasing process.