1. Well-designed internal control that is functioning effectively is most likely to detect a fraud arising from:

Multiple Choice

• The fraudulent action of several employees.
• The fraudulent action of an individual employee.
• Informal deviations from the official organization chart.
• Management fraud.

2. The program flowcharting symbol representing a decision is a:

Multiple Choice

• Triangle.
• Circle.
• Rectangle.
• Diamond.

3. After documenting the client's prescribed internal control, the auditors will often perform a walk-through of each transaction cycle. An primary objective of a walk-through is to:

Multiple Choice

• Verify that the controls have been implemented (placed in operation).
• Replace tests of controls.
• Evaluate the major strengths and weaknesses in the client's internal control.
• Identify weaknesses to be communicated to management in the management letter.

4. Which of the following is correct with respect to control deficiencies discovered during an audit?

Multiple Choice

• Auditors must communicate and recommend corrections relating to all material weaknesses in internal control to management.
• All material weaknesses in internal control must be reported to the audit committee in writing.
• All such matters must be communicated to the audit committee and regulatory agencies.
• All control deficiencies are also significant deficiencies.

5. Which of the following is least likely to be considered an audit risk assessment procedure relating to internal control?

Multiple Choice

• Counting marketable securities at year-end.
• Inquiries of client personnel.
• Inspecting documents and reports.
• Observing the application of specific controls.

6. Which of the following is not ordinarily a procedure for documenting an auditor's understanding of internal control for planning purposes?

Multiple Choice

• Checklist.
• Flowchart.
• Questionnaire.
• Reconciliation.