Chapter 06 – Internal Control in a Financial Statement Audit
50. A substantive strategy differs from a reliance strategy in that a substantive strategy includes
51. Which of the following statements concerning control risk is correct?
Chapter 06 – Internal Control in a Financial Statement Audit
52. Assessing control risk at below the maximum most likely would involve
53. In the audit of financial statements, an auditor’s primary consideration regarding an internal
control policy or procedure is whether the policy or procedure
Chapter 06 – Internal Control in a Financial Statement Audit
54. Which of the following most likely would not be considered an inherent limitation of the
potential effectiveness of an entity’s internal controls?
55. It is important for the CPA to consider the competence of the audit client’s employees
because their competence bears directly and importantly upon the
56. As part of gaining an initial understanding of internal control, an auditor is required to do all
of the following except:
Chapter 06 – Internal Control in a Financial Statement Audit
57. Effective internal control in a small company that has an insufficient number of employees
to permit proper division of responsibilities can best be enhanced by
58. The independent auditor should acquire an understanding of the internal audit function as it
relates to the assessment of control risk because
Chapter 06 – Internal Control in a Financial Statement Audit
59. In obtaining an understanding of an entity’s internal control in a financial statement audit of
a non-public company, an auditor is not obligated to
60. After completing the preliminary phase of the review of internal control, the auditor decides
not to rely on the system to restrict substantive procedures. Documentation may be limited to
the auditor’s
Chapter 06 – Internal Control in a Financial Statement Audit
61. In an audit of financial statements of a private company in accordance with generally
62. For a complex IT system, auditors are least likely to use which of the following when
documenting their understanding of internal controls?
Chapter 06 – Internal Control in a Financial Statement Audit
63. Assessing control risk below maximum involves all of the following except:
64. When an auditor increases the planned assessed level of control risk because certain control
activities were determined to be ineffective, the auditor would most likely increase the
Chapter 06 – Internal Control in a Financial Statement Audit
65. Which of the following procedures most likely would be included as part of an auditor’s
tests of controls?
66. An auditor is least likely to test the internal controls that provide for
67. For certain controls, such as segregation of duties, documentary evidence may not exist. An
auditor would most likely test the procedures by
Chapter 06 – Internal Control in a Financial Statement Audit
68. Walkthroughs usually involve all of the following audit procedures except:
69. Before applying substantive procedures to the details of accounts at an interim date (a date
prior to the balance sheet date), an auditor should
Chapter 06 – Internal Control in a Financial Statement Audit
70. A high detection risk strategy includes all of the following except:
71. The auditor should consider all of the following when deciding whether substantive
procedures will be performed at an interim date except:
Chapter 06 – Internal Control in a Financial Statement Audit
73. Based on a study and evaluation completed at an interim date, the auditor concludes that no
significant internal control weaknesses exist. The records and procedures would most likely be
tested again at year-end if
Chapter 06 – Internal Control in a Financial Statement Audit
74. Which of the following statements is correct concerning an auditor’s communication of
internal control related matters (significant deficiencies) noted in an audit?
75. The auditor’s communication of material weaknesses in internal control for a nonpublic
company is
Chapter 06 – Internal Control in a Financial Statement Audit
76. Significant deficiencies are matters that come to an auditor’s attention that should be
communicated to an entity’s audit committee because they represent
77. All of the following are significant deficiencies except:
78. The normal sequence of documents and operations on a well-prepared systems flowchart is
Chapter 06 – Internal Control in a Financial Statement Audit
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79. When preparing a record of a client’s internal control, the independent auditor sometimes
uses a systems flowchart, which can best be described as a
80. Which of the following is not a characteristic of a batch processed computer system?