S1. Operational risk, as opposed to efficiency, is the risk of loss resulting from inadequate internal processes, people, and systems or from external events. S2. FS audit is concerned on to see that the credit control has been strictly followed while operational audit is concerned on to study the credit control system for suggesting better measures as necessary. Which of the following statements is/are false? Group of answer choices Statement I only Statements I and II Statement II only None of the statements

S1. Operational risk, as opposed to efficiency, is the risk of loss resulting from inadequate internal processes, people, and systems or from external events. S2. FS audit is concerned on to see that the credit control has been strictly followed while operational audit is concerned on to study the credit control system for suggesting better measures as necessary. Which of the following statements is/are false? Group of answer choices Statement I only Statements I and II Statement II only None of the statements

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter5: Professional Auditing Standards And The Audit Opinion Formulation Process

Section: Chapter Questions

Problem 43MCQ

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S1. Operational risk, as opposed to efficiency, is the risk of loss resulting from inadequate internal processes, people, and systems or from external events. S2. FS audit is concerned on to see that the credit control has been strictly followed while operational audit is concerned on to study the credit control system for suggesting better measures as necessary. Which of the following statements is/are false?
Q10 Which of the following best describes the reason why independent auditors report on financial statements? a. management fraud may exist and it is more likely to be detected by independent auditors. b. Different interests may exist between the company preparing the statements and the persons using the statements. c. A misstatement of account balances may exist and is generally corrected as the result of the independent auditors' work. d. Poorly designed internal control may be in existence.
Tests of controls are most likely to be omitted when(1) an account balance reflects many transactions.(2) control risk is assessed at less than the maximum.(3) the understanding of the control structure indicates that evaluating the effectiveness of control policies and procedures is likely to be inefficient.(4) the auditor wishes to increase the acceptable level of detection risk.
Which of the following is appropriate about risk assessment? A. The assessed level of inherent and control risk can be sufficiently low, thus resulting to eliminating the need for substantive tests. B. Audit risk may be more effectively determined by assessing inherent and control risk separately. C. Detection risk is eliminated if an auditor were to examine 100 percent off the account balance or class of transactions. D. There is an iverse relationship between detection risk and the combined level of inherent and control risk
When completing the audit of internal controls for an issuer, the severity of an internal control deficiency depends ona. Whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstatement of an account balance or disclosure.b. Whether a misstatement has actually occurred as a result of the deficiency.c. The magnitude of the potential misstatement resulting from the deficiency or the deficiencies.d. Both a and c are correct.e. All of the above are correct.
In auditing accounts receivable, the negative form of confirmations request is used when A. Response rate to positive confirmation request was low B. The total amount of account receivable is immaterial to the financial statement taken as a whole C. Recipients are likely to return positive confirmation without verifying the information D. The combined assessed level of both inherent risk and control risk relative to account receivable is low
In accounting, which term describes deficiencies or flaws in the design or operation of internal controls that could increase the risk of errors, fraud, or misstatements in financial reporting? a) External audit b) Compliance review c) Internal control weaknesses d) Financial statement analysis
1. Cite specific examples of risk avoidance, Reduction, Transfer and Retention? 2. What is the significance of internal control in an organization? Cite an example of a company that failed due to IC deficiency?
tch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.
Question 1 (i) Operational controls are designed to prevent failures in operational procedures caused by: i. Machine breakdown and human error ii. Failures in the performance of systems and weaknesses in procedures. iii. Poor management iv. Risks of errors or fraud in accounting systems and accounting and finance activities. A. i and ii onlyB. i, ii and iii onlyC. i, ii and iv onlyD. All of the above (ii) Risk tolerance refers to A. The amount of risk the company is prepared to accept in order to achieve its financial objectives.B. The amount of risk the company could accept without a serious threatto its financial stability. C. The level of risk a company (or any other organisation) is willing to take in the pursuit of its objectives. D. The combination of the desire to take on risk in order to ontain a financial return and its risk capacity. (iii) The main objective of an external audit is to A. Protect the interests of shareholdersB. Detect fraud and irregularities in the company's…
1. What is the primary reason that auditors’ assess internal control? a)To determine the risk of misstatements of accounts. b)To make recommendations for improvements in controls. c)To determine the nature of various accounts. d)To find misstatements in accounts. 2. Tests of controls are designed to determine all of the following, except: a)How consistent the control was applied. b)Whether or not the control was overridden. c)How a control was applied. d)By what means the control was applied. 3. All of the following are possible responses to a pervasive weakness in internal control except: a)Increase the size of a sample for certain tests in the engagement. b)Adding an element of unpredictability to the procedures performed. c)Increasing the level of supervision on the engagement. d)Assign more experienced personnel to the engagement. 4. Which of the following is not a COSO component of internal control? a)Board oversight. b)Control activities. c)Risk assessment. d)Control…
Which of the following is desirable in a good system of internal accounting controls? Select one: O O O a. Develop plans and budgets b. Encourage employee collusion c. Maintain adequate accounting records d. Two of the above e. None of the above