Chapter 6 AF470 2:00 class Fall 2018 1. Consider the following statements: I. Per COSO, Control Policies are the policies and procedures that help insure that management's directives are carried out. I. A Substantive Strategy is used when control risk is considered high. a. I is true; 11 is true b. I is true; Il is false C. I is false, ll is true d. I is false; Il is false 2. Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when a. External policies established by parties outside the entity affect its accounting practices. 6. Management is dominated by one individual. c. Internal audit personnel have direct access to the board of directors and the entity's management. d. The audit committee is active in overseeing the entity's financial reporting policies. 3. The documentation of an auditor's understanding of internal controls a. Is optional. b. Must be exclusively in either narrative, questionnaires, or flowchart form. C. Must include flowcharts. a Can include any combination of narratives, questionnaires, or flowchart. 4. To obtain evidential matter about the operating effectiveness of controls, an auditor uses a variety of techniques including: a. Analytical procedures Confirmation Observation d. Vouching 5. Which of the following statements is correct regarding internal control? a. A well-designed internal control environment ensures the achievement of an entity's control D) An inherent limitation to internal controlis the facthat controls can be circumvented by c. A well-designed and well-operated internal control environment should detect collusion d. Internal control is a necessary business function and should be designed and operated to detect objectives. ) An inherent limitation to internal control is the fact management override be circumvented by perpetuated by two people. all errors and fraud. See CPA Exam materials. Chapter 6 AF470 2:00 class Fall 2018 1. Consider the following statements: I. Per COSO, Control Policies are the policies and procedures that help insure that management's directives are carried out. I. A Substantive Strategy is used when control risk is considered high. a. I is true; 11 is true b. I is true; Il is false C. I is false, ll is true d. I is false; Il is false 2. Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when a. External policies established by parties outside the entity affect its accounting practices. 6. Management is dominated by one individual. c. Internal audit personnel have direct access to the board of directors and the entity's management. d. The audit committee is active in overseeing the entity's financial reporting policies. 3. The documentation of an auditor's understanding of internal controls a. Is optional. b. Must be exclusively in either narrative, questionnaires, or flowchart form. C. Must include flowcharts. a Can include any combination of narratives, questionnaires, or flowchart. 4. To obtain evidential matter about the operating effectiveness of controls, an auditor uses a variety of techniques including: a. Analytical procedures Confirmation Observation d. Vouching 5. Which of the following statements is correct regarding internal control? a. A well-designed internal control environment ensures the achievement of an entity's control D) An inherent limitation to internal controlis the facthat controls can be circumvented by c. A well-designed and well-operated internal control environment should detect collusion d. Internal control is a necessary business function and should be designed and operated to detect objectives. ) An inherent limitation to internal control is the fact management override be circumvented by perpetuated by two people. all errors and fraud. See CPA Exam materials