Auditing and Internal Control

5177 Words21 Pages
Chapter 1—Auditing and Internal Control TRUE/FALSE 1. Corporate management (including the CEO) must certify monthly and annually their organization’s internal controls over financial reporting. ANS: F PTS: 1 2. Both the SEC and the PCAOB require management to use the COBIT framework for assessing internal control adequacy. ANS: F PTS: 1 3. Both the SEC and the PCAOB require management to use the COSO framework for assessing internal control adequacy. ANS: F PTS: 1 4. A qualified opinion on management’s assessment of internal controls over the financial reporting system necessitates a qualified opinion on the financial statements? ANS: F PTS: 1 5. The same internal control objectives apply to manual and computer-based…show more content…
The most cost-effective type of internal control is a. preventive control b. accounting control c. detective control d. corrective control ANS: A PTS: 1 4. Which of the following is a preventive control? a. credit check before approving a sale on account b. bank reconciliation c. physical inventory count d. comparing the accounts receivable subsidiary ledger to the control account ANS: A PTS: 1 5. A well-designed purchase order is an example of a a. preventive control b. detective control c. corrective control d. none of the above ANS: A PTS: 1 6. A physical inventory count is an example of a a. preventive control b. detective control c. corrective control d. Feed-forward control ANS: B PTS: 1 7. The bank reconciliation uncovered a transposition error in the books. This is an example of a a. preventive control b. detective control c. corrective control d. none of the above ANS: B PTS: 1 8. Which of the following is not an element of the internal control environment? a. management philosophy and operating style b. organizational structure of the firm c. well-designed documents and records d. the functioning of the board of directors and the audit committee ANS: C PTS: 1 9. Which of the following suggests a weakness in the internal control environment? a. the firm has an up-to-date organizational chart b. monthly reports comparing actual performance to budget are distributed to
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