11. It is important for an auditor to understand a public companys system of internal control in order to:

1. audit internal control over financial reporting.
2. make a preliminary assessment of control risk.
3. develop an audit strategy.
4. All of the answer choices are correct.

12. IT general controls are ________-level controls.
    1. Entity
    2. Function
    3. Division
    4. Transaction

13. To obtain evidence that online access controls are properly functioning, an auditor most likely would
    1. Create checkpoints at periodic intervals after live data processing to test for unauthorized use of the system.
    2. Examine the transaction log to discover whether any transactions were lost or entered twice due to a system malfunction.
    3. Enter invalid identification numbers or passwords to ascertain whether the system rejects them.
    4. Vouch a random sample of processed transactions to assure proper authorization.

14. Working papers:
    1. document the auditors conclusion about control risk and the basis for that conclusion.
    2. document the purpose of the control selected for testing and the conclusion made by the auditor but not the results of the test.
    3. are necessary for the first-year auditor to keep track of the daily work but are not important to the overall audit.
    4. document the results of the tests but not the purpose of the control selected for testing.

15. The objective of tests of details of transactions performed as substantive procedures is to
    1. Verify that significant deficiencies in the accounting system are discovered.
    2. Detect material misstatements in the financial statements.
    3. Evaluate whether management's policies and procedures operated effectively.
    4. Identify specific financial statement assertions that satisfy the audit objectives.

16. The Control environment includes the following:

a. tone at the top

b. The board of directors demonstrate independence from management

c. The organization holds individuals accountable for their internal control responsibilities

d. All of the above

17. Which of the following elements ultimately determines the specific auditing procedures that are necessary in the circumstances to afford a reasonable basis for an opinion?
    1. Materiality.
    2. Reasonable assurance.
    3. Auditor judgment.
    4. Relative risk.

18. Which of the following procedures would an auditor ordinarily perform first in evaluating the reasonableness of management's accounting estimates?
    1. Obtain an understanding of how management developed its estimates.
    2. Analyze historical data used in developing assumptions to determine whether the process is consistent.
    3. Review transactions occurring prior to the completion of fieldwork that indicate variations from expectations.

19. Types of substantive procedures include
    1. analytical procedures.
    2. substantive tests to follow-up on notable items identified when performing audit data analytics.
    3. tests of details of transactions and balances including audit data analytics (ADA) used as a substantive test.
    4. all of the choices are correct.

20. When internal controls are strong, the auditor:
    1. is ready to issue an unmodified opinion.
    2. may be able to conduct less substantive testing
    3. should plan to conduct more substantive testing.
    4. need not test the internal controls