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1

Internal control is primarily established within a company to do which of the following?
A)Prevent fraud
B)Provide reasonable assurance that the company's objectives will be achieved
C)Catch all errors that may occur in the company.
D)Aid in the effective auditing of the company.
2

Providing reasonable assurance with respect to which of the following is not required under the internal control provisions of the Foreign Corrupt Practices Act?
A)Management is responsibility for knowledge and authorization of transactions.
B)Transactions are recorded to maintain accountability for assets.
C)Access to assets is limited to members of management.
D)Transactions are recorded to permit the preparation of reliable financial statements.
3

The auditors' understanding of their client's internal control provides a basis for:
                   Assessing sufficiency risk     Planning the audit     Assessing control risk
A)          Yes                                       Yes                              Yes
B)          Yes                                       Yes                              No
C)          No                                        Yes                              Yes
D)          No                                        Yes                              No
4

Billy Jo is responsible for custody of the finished goods in the warehouse. If his company wishes to maintain strong internal control, which of the following responsibilities are incompatible with his primary job?
A)He is also responsible for the company's fixed asset control ledger.
B)He is responsible for receiving of goods into the warehouse.
C)He is responsible for the accounting records for all receipts and shipments of goods from the warehouse.
D)He is responsible for issuing goods for shipment.
5

Which of the following is least likely when an auditor performs an integrated audit of a public company’s financial statements?
A)Issuing an audit report on internal control over financial reporting.
B)Issuing an audit report on the financial statements.
C)Omitting tests of controls for several major accounts.
D)Performing tests of internal control design effectiveness.
6

Which of the following describes the function of a fidelity bond?
A)An insurance policy that covers theft by a bonded employee.
B)A short term investment that is secured by a bank.
C)It is a procedure to separate the duties of employees.
D)A contract between parents and their children to remain celibate.
7

Tests of controls are used to test whether controls are
A)Operating effectively.
B)Placed in operation (implemented).
C)Properly accumulated into balance sheet totals.
D)Properly documented by the client.
8

Tests of controls are least likely to include:
A)Inquiries of appropriate client vendors.
B)Reperformance of a control.
C)Observation of the application of an accounting procedure.
D)Inspection of documents.
9

Which of the following is one of the most fundamental and effective controls?
A)Increased use of computers for recording accounting transactions.
B)Increased reliance on internal auditors to monitor accounting systems.
C)Segregation of incompatible duties across several people.
D)Having internal auditors report only to the Board of Directors.
10

Which circumstance would be consistent with both the planned assessed level and the assessed level of control risk being low?
A)No tests of controls have been performed.
B)Tests of controls have been performed.
C)Externally generated evidence supports management's contentions relating to internal control.
D)The results of the consideration of internal control suggest that controls are not operating effectively.
11

The results of the consideration of internal control are least likely to affect the auditors' decisions pertaining to:
A)The use of analytical procedures.
B)The assessment of control risk.
C)The assessment of inherent risk.
D)Detailed tests of ending balances.
12

Relating to a deficiency in internal control, which of the following is not possible?
                         Is it a significant deficiency?            Is it a material weakness?
A)                         Yes                                               Yes
B)                         Yes                                               No
C)                         No                                                Yes
D)                         No                                                No





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