Chapter 07 – Auditing Internal Control over Financial Reporting
1. All companies must follow the guidelines of AS5.
2. Most public companies must follow the guidelines of AS5.
3. In a public company, management must assess and report on internal control over financial
reporting.
Chapter 07 – Auditing Internal Control over Financial Reporting
4. In a public company, management’s report on internal control must be signed by the
members of the audit committee.
5. Based on PCAOB guidelines, the audit of ICFR and financial statements audit should be
conduced as an “integrated audit.”
6. The PCAOB makes it clear that the CEO and CFO are responsible for the internal control
over financial reporting and the preparation of the statements.
Chapter 07 – Auditing Internal Control over Financial Reporting
7. The likelihood of an event is “more than remote” when it is “highly possible.”
8. When auditing a public company, the auditor must form an opinion on the effectiveness of
internal control over financial reporting, or issue a disclaimer in the event of a scope limitation.
9. In order for an external auditor to complete an audit of a public company, the entity’s
management must comply with all of the following except:
Chapter 07 – Auditing Internal Control over Financial Reporting
10. An “integrated audit” as stated in Section 404 of the Sarbanes-Oxley Act means
11. Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the
following:
Chapter 07 – Auditing Internal Control over Financial Reporting
12. According to the PCAOB, who is responsible for the reliability of the internal controls over
financial reporting process of an entity?
13. The person in charge of authorizing credit to customers does not properly understand what
constitutes a credit risk. This is an example of
Chapter 07 – Auditing Internal Control over Financial Reporting
14. A deficiency that implies that there is a reasonable possibility of misstatement in the
financial statements that is significant but not material is
15. Which of the following is not a topic that requires special consideration by management
during management’s internal control assessment process and by the auditor during the audit of
internal control?
Chapter 07 – Auditing Internal Control over Financial Reporting
16. Management documentation should include all of the following except:
17. Which of the following is not a primary objective of internal control as established by
COSO?
18. The main goal of auditing internal control is
Chapter 07 – Auditing Internal Control over Financial Reporting
19. An auditor performing an audit of internal control over financial reporting would be
required to
20. In determining the extent to which the auditor may use the work of others in the audit of
ICFR, the auditor should do all of the following except:
Chapter 07 – Auditing Internal Control over Financial Reporting
21. Which of the following is least likely to represent a material weakness in internal control for
Flynt Corporation?
22. S&H Associates has just performed an audit of Bob’s Bikes. S&H was unable to obtain a
written representation from management about internal control. Which of the following is
Chapter 07 – Auditing Internal Control over Financial Reporting
23. Public reporting on the effectiveness of internal control over financial reporting, as required
by the Sarbanes-Oxley Act, includes
24. Which of the following concerning the auditor’s report on internal control over financial
reporting is correct?
Chapter 07 – Auditing Internal Control over Financial Reporting
25. Prior to issuing a report on internal controls over financial reporting, an auditor is required
to
26. Which of the following is not true?
Chapter 07 – Auditing Internal Control over Financial Reporting
27. An “integrated audit”
28. The primary purpose of a generalized computer audit program is to allow the auditor to
Chapter 07 – Auditing Internal Control over Financial Reporting
29. Which of the following audit procedures would an auditor be least likely to perform using a
generalized computer audit program?
30. The auditor is least likely to use generalized audit software to
31. The five step process in the audit of ICFR includes
Chapter 07 – Auditing Internal Control over Financial Reporting
32. Which of the following is an advantage of generalized computer audit packages?
33. ACL is an example of
34. The PCAOB’s definition of internal control over financial reporting specifically mentions
all of the following control activities except:
Chapter 07 – Auditing Internal Control over Financial Reporting
35. Which of the following is not an element of management’s assessment process for the
effectiveness of internal control?
36. Which of the following is true regarding management’s documentation of internal controls?
37. Which of the following statements is false?
Chapter 07 – Auditing Internal Control over Financial Reporting
38. To obtain an understanding of significant processes and relevant subprocesses, auditors
would be least likely to use which of the following techniques?
39. Management’s written representations concerning internal control are
Chapter 07 – Auditing Internal Control over Financial Reporting
40. In the context of an audit of internal controls, the auditor must document all of the following
except:
41. Examples of entity-level controls include