Reference no: EM13343543

REQUIRED: Indicate the best answer choice for each of the following.

1. Which of the following is not one of the four basic functions of every transaction?
a. Consideration.
b. Recording.
c. Initiation.
d. Execution.
e. Delivery and/or receipt.

2. Which of the following necessary controls would address potential misstatement arising from a voucher being paid twice?
a. Periodic independent bank reconciliations.
b. Electronic cancellation of vouchers and supporting information when a check is issued.
c. Separate duties for approving payment vouchers and sighing checks.
d.  The computer compares the sum of checks issued with the entry to cash disbursements.
e. Only authorized personnel are permitted to run the cash disbursements program and handle checks.

3. Which of the following tests of controls would be most effective in testing controls designed to prevent checks from being issued or recorded for the wrong amount?
a. Observation of bank reconciliations.
b. Observation of segregation of duties.
c. Computer assisted audit techniques such as test data to test computer application control.
d. Observe documents being marked or cancelled as "paid".
e. Documentation of general controls over access to computer programs and documentation.

4. "A significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material mistatement of the annual or interim financial statements will not be prevented or detected" is the definition of:
a. a material weakness.
b. a significant deficiency.
c. a control deficiency.
d. a material misstatement.
e. an internal control deficiency.

5. Which of the following statements is true about an auditor's responsibility to communicate with respect to a public company's internal controls?
a. The auditor will issue an adverse report on the effectiveness of internal controls if a material weakness in internal controls over financial reporting exists.
b. Auditors are required to communicate all significant deficiencies in internal control to management but not necessarily to the audit committee.
c. Auditors are required to communicate all significant deficiencies in internal control to the audit committee but not necessarily to management.
d. The difference between a material weakness and a significant deficiency is inconsequential.
e. The auditor's judgment is based on either the likelihood of the misstatement or on the potential magnitude of the misstatement.

6. The nature of tests of controls relates to the type of evidence obtained. Which of the following is not an example of a type of evidence relevant to tests of controls?
a. Inquiries of entity personnel.
b. Inspection of documents.
c. Observation of application of the control.
d. Inspection of signatures indicating performance of the control.
e. Reperformance of the application of the control by entity personnel.