I-Asgn5.docVIP

LESSON 5 Assignment Question 1 20 marks Multiple choice 2 marks each a. What do management’s internal control objectives include? 1 Reducing the amount of testing done by the auditors 2 Allowing the auditor to assess control risk 3 Preventing and detecting fraud 4 Implementing policies and procedures such that control risk is assessed below maximum b. To be reliable, how should a control procedure be designed? 1 To meet the control objective it was designed to achieve 2 To be effective, used as intended, and applied consistently throughout the period under audit 3 To support a control risk assessment of low or medium 4 To be capable of detecting material errors c. When planning to use a combined approach, what should an auditor do? 1 Obtain an understanding of control systems that enhance the reliability of data and information 2 Not test controls because control risk is assessed at maximum 3 Do the same amount of substantive procedures as if a substantive approach was used 4 Use both narratives and flowcharts to document internal controls d. What is the primary purpose for obtaining an understanding of an audit client’s internal control structure? 1 Provide a basis for making constructive suggestions in a management letter 2 Determine the nature, timing, and extent of tests to be performed in the audit 3 Obtain sufficient appropriate evidential matter to afford a reasonable basis for an opinion on the financial statements under examination 4 Provide information for a communication of internal control structurerelated matters to management e. Which of the following is a not a control activity used by companies? 1 Segregation of functional responsibilities 2 Management philosophy and operating style 3 Review of actual performance versus budgets 4 Edit checks of input data f. What is a client’s control activity ? 1 An action taken by auditors to obtain evidence 2 An action taken by client personnel for the purpose of preventing, detecting,