Internal Control

4993 Words20 Pages
Chapter 5: Internal Control over Financial Reporting 1. Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and ineffective and inefficient operations. FALSE 2. Auditing standards require that the auditor exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit. TRUE 3. If internal controls are not enforced they are useless and can lead to waste and fraud. TRUE 4. If an organization is too lenient in its treatment of employees who committed fraud, the control environment will be seen as stronger than if the treatment were harsher. FALSE 5. Weakness…show more content…
FALSE 29. When control risk is assessed at a minimum level, the auditor assumes that the internal controls are reliable in preventing or detecting material misstatements. TRUE 30. Performing a walk-through provides an auditor an understanding of the nature of processing in important accounting applications. TRUE 31. The payroll department should be responsible for signing payroll checks. FALSE 32. A strong control environment can reduce all the financial reporting risks to zero. FALSE 33. The auditor 's preliminary assessment of control risk is based on an understanding of the control system as it has operated in the past and is designed to operate. TRUE 34. When control risk is assessed at less than maximum, the auditor must gain assurance that the control procedures are effective. TRUE 35. The auditor is obligated to report significant deficiencies in the control structure discovered during an audit to the audit committee or its equivalent. TRUE 36. One of the advantages of a computerized accounting system is that the computerized system eliminates the need for internal controls. FALSE 37. Transaction-oriented controls should be tested using the guidelines developed for attribute testing utilizing statistical sampling techniques. TRUE 38. Control risk can be evaluated on a scale from high to low. TRUE 39. Testing internal control for effectiveness is done in every audit. FALSE 40.
Open Document