Chapter 06 – Internal Control in a Financial Statement Audit
81. Which of the following is a general control that would most likely assist an entity whose
systems analyst left the entity in the middle of a major project?
82. A customer intended to order 100 units of product Z96014, but incorrectly ordered
nonexistent product Z96015. Which of the following controls most likely would detect this
error?
Chapter 06 – Internal Control in a Financial Statement Audit
83. Assume that an auditor estimates that 10,000 checks were issued during the accounting
period. If an IT application control which performs a limit check for each check request is to be
subjected to the auditor’s test data approach, the sample should include
84. After obtaining an understanding of internal controls and assessing control risk of an entity,
an auditor decided not to perform tests of controls for purposes of the audit. The auditor most
likely decided that
Chapter 06 – Internal Control in a Financial Statement Audit
85. After the auditor has prepared a flowchart of the internal controls surrounding sales and
evaluated the design of the system, the auditor would perform tests of controls on all control
activities
86. As the acceptable level of detection risk increases, an auditor may change the
Chapter 06 – Internal Control in a Financial Statement Audit
87. In a properly designed internal control system, the same employee may be permitted to
88. A procedure that would most likely be used by an auditor in performing tests of control
activities that involve segregation of functions and that leave no transaction trail is
Chapter 06 – Internal Control in a Financial Statement Audit
89. During consideration of internal control in a financial statement audit of a nonpublic
company, an auditor is not obligated to
90. Audit evidence concerning proper segregation of duties ordinarily is best obtained by
Chapter 06 – Internal Control in a Financial Statement Audit
91. While substantive procedures may support the accuracy of underlying records, these tests
frequently provide no affirmative evidence of segregation of duties because
92. Before applying substantive procedures to the details of asset and liability accounts at an
interim date, the auditor should
Chapter 06 – Internal Control in a Financial Statement Audit
93. When communicating internal control-related matters noted in an audit of a nonpublic
company, an auditor’s report issued on significant deficiencies should indicate that
Chapter 06 – Internal Control in a Financial Statement Audit
95. Internal control has become a very important focus for publicly traded and privately-held
companies alike. Internal control is intended to accomplish at least four objectives and consists
of five components of internal control. List the four objectives and five components of internal
control.
Chapter 06 – Internal Control in a Financial Statement Audit
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96. What are two potential benefits and two potential risks of using IT for an entity’s internal
control?
Chapter 06 – Internal Control in a Financial Statement Audit
97. In terms of an audit, define substantive strategy and reliance strategy. Include in your
definition how the different strategies relate to internal control. Which strategy would best
relate to a lower control risk?
98. Describe the limitations of internal control. Why do limitations on internal control exist?
Chapter 06 – Internal Control in a Financial Statement Audit
99. What are four potential tools available to the auditor for documenting their understanding of
a client’s system of internal control?
100. What are some typical types of evidence that may be collected in testing a client’s internal
controls?
Chapter 06 – Internal Control in a Financial Statement Audit
101. Why might an auditor decide to test controls at an interim date?
102. While performing an audit on the internal controls over financial reporting for AirWaves
Corporation, your audit team finds what it considers to be a significant deficiency. AirWaves is
a large, private company. What steps would you take to communicate this finding?
Chapter 06 – Internal Control in a Financial Statement Audit
103. Data capture occurs through source documentation, direct data entry, or a combination of
the two. List three purposes of data capture controls.
104. What are the differences between document flowcharts, system flowcharts, and program
flowcharts?