Reference no: EM132712595

Problem 1: Which of the following statements best describes "control deficiency"?

a. A control deficiency exists if the design or operation of controls does not permit company personnel to prevent or detect misstatements on a timely basis.

b. A control deficiency exists if one or more deficiencies exist that adversely affect a company's ability to prepare external financial statements reliably.

c. A control deficiency exists if the design or operation of controls results in a more than remote likelihood that controls will not prevent or detect misstatements.

d. A control deficiency exists if the design or operation of controls results in a more than probable likelihood that controls will prevent or detect misstatements.

Problem 2: When a client uses a service center for processing transactions,

a. The auditor can assume that the controls are adequate because it is an independent enterprise.

b. Auditing standards require the auditor to test the service center's controls if the service center application involves processing significant financial data.

c. And the user auditor decides to rely on the service auditor's report, the user audit must make reference to the report of the service auditor in the opinion on the user organization's financial statements.

d. Auditing standards do not require the auditor to test the service center's controls if the service center application involves processing significant financial data.

Problem 3:  Which of the following statements is true? In deciding on substantive tests of transactions

a. Some procedures are commonly employed on every audit regardless of the circumstances.

b. All procedures are dependent on the adequacy of the controls and the results of the tests of controls.

c. Results obtained in the prior year's audit will not affect the procedures used this year.

d. The materiality of the item will not influence the choice of procedures used.

Problem 4:  ________ tests are for omitted transactions, while _________ tests are for non-existent transactions.

a. Tracking; verifying            c. Vouching; tracing

b. Verifying; tracking              d. Tracing; vouching