chapter 10_GE

Auditing and Assurance Services, 14e, Global Edition (Arens)

Chapter 10 Considering Internal Control

Learning Objective 10-1

1) Which of the following is not one of the three primary objectives of effective internal control?

A) reliability of financial reporting

B) efficiency and effectiveness of operations

C) compliance with laws and regulations

D) assurance of elimination of business risk

Answer: D

Terms: Internal control objectives

Diff: Easy

Objective: LO 10-1

AACSB: Analytic skills

2) The Public Company Accounting Oversight Board states that reasonable assurance allows a:

A) small likelihood of ineffective internal controls.

B) remote likelihood that material misstatements will not be prevented or detected by internal control.

C) likelihood that material misstatements will not be prevented or detected by internal control.

D) high likelihood that material misstatements will not be prevented or detected by internal control. Answer: B

Terms: Reasonabl e assurance

Diff: Easy

Objective: LO 10-1

AACSB: Refl ective thinking skills

Topic: Public

3) Which of the following is most correct regarding the requirements under Section 404 of the Sarbanes Oxley Act?

A) The audits of internal control and the financial statements provide reasonable assurance a s to misstatements.

B) The audit of internal control provides absolute assurance of misstatement.

C) The audit of financial statements provides absolute assurance of misstatement.

D) The audits of internal control and the financial statements provide absolute assurance as to misstatements.

Answer: A

Terms: Sarbanes Oxl ey Act Section 404

Diff: Easy

Objective: LO 10-1

AACSB: Refl ective thinking skills

4) Which of management's assertions with respect to implementing internal controls is the auditor primarily concerned?

A) efficiency of operations

B) reliability of financial reporting

C) effectiveness of operations

D) compliance with applicable laws and regulations

Answer: B

Terms: Management's assertions

Diff: Easy

Objective: LO 10-1

AACSB: Refl ective thinking skills

5) To issue a report on internal control over financial reporting for a public company, an auditor must:

A) evaluate management's assessment process.

B) independently assess the design and operating effectiveness of internal control.

C) evaluate management's assessment process and independently assess the design and operating effectiveness of internal control.

D) test controls over significant account balances.

Answer: C

Terms: Internal control over financi al reporting for public company

Diff: Moderate

Objective: LO 10-1

AACSB: Refl ective thinking skills

Topic: Public

6) A company frequently sells products at a price below inventory cost. Essential controls in the risk assessment process would include:

A) adequate controls that address the risk of overstating inventory.

B) adequate controls that address the risk of not including a purchased item in inventory.

C) adequate controls that address the risk of understatement of inventory.

D) adequate controls that address the risk of overstatement of cost of goods sold.

Answer: A

Terms: Control s in risk assessment process

Diff: Moderate

Objective: LO 10-1

AACSB: Analytic skills

7) Internal controls are not designed to provide reasonable assurance that:

A) all frauds will be detected.

B) transactions are executed in accordance with management's authorization.

C) access to assets is permitted only in accordance with management's authorization.

D) company personnel comply with applicable rules and regulations.

Answer: A

Terms: Internal control s; reasonabl e assurance

Diff: Moderate

Objective: LO 10-1

AACSB: Analytic skills

8) Describe each of the three broad objectives management typically has for internal control. With which of these objectives is the auditor primarily concerned?

Answer: The three objectives are:

?Reliability of financial reporting. Management has both a legal and professional responsibility to be sure that the information is fairly presented in according with reporting requirements such as GAAP.?Efficiency and effectiveness of operations. Controls within an organization are meant to encourage efficient and effective use of its resources to optimize the company's goals.

?Compliance with laws and regulations. Public, non-public, and not-for-profit organizations are required to follow many laws and regulations. Some relate to accounting only indirectly, such as environmental protection and civil rights laws. Others are closely related to accounting, such as income tax regulations and anti-fraud legal provisions.

The auditor's focus in both the audit of financial statements and the audit of internal controls is on the controls over the reliability of financial reporting plus those controls over operations and compliance with laws and regulations that could materially affect financial reporting.

Terms: Three broad objectives management has for internal control

Diff: Easy

Objective: LO 10-1

AACSB: Refl ective thinking skills

9) The Sarbanes-Oxley Act of 2002 requires that public companies issue an internal control r eport.

A) True

B) False

Answer: A

Terms: Sarbanes-Oxl ey Act

Diff: Easy

Objective: LO 10-1

AACSB: Refl ective thinking skills

Topic: SOX

10) The primary emphasis by auditors when evaluating and testing internal control is on controls over classes of transactions rather than controls over account balances.

A) True

B) False

Answer: A

Terms: Evaluating and testing internal controls

Diff: Moderate

Objective: LO 10-1

AACSB: Refl ective thinking skills

Learning Objective 10-2

1) Which of the following is responsible for establishing a private company's internal control?

A) Senior Management

B) Internal Auditors

C) Senior Management and auditors

D) Audit committee

Answer: A

Terms: Internal control

Diff: Easy

Objective: LO 10-2

AACSB: Refl ective thinking skills

2) Two key concepts that underlie management's design and implementation of internal control are:

A) costs and materiality.

B) absolute assurance and costs.

C) inherent limitations and reasonable assurance.

D) collusion and materiality.

Answer: C

Terms: Internal control design and implementation

Diff: Easy

Objective: LO 10-2

AACSB: Analytic skills

3) The PCAOB places responsibility for the reliability of internal controls over the financial reporting process to:

A) the company's board of directors.

B) the audit committee of the board of directors.

C) the CEO and the CFO.

D) the CFO and the Independent Auditors.

Answer: C

Terms: PCAOB; internal control responsibility

Diff: Easy

Objective: LO 10-2

AACSB: Refl ective thinking skills

Topic: Public

4) Which of the following parties provides an assessment of the effectiveness of internal control over financial reporting for public companies?

Answer: A

Terms: Internal control effectiveness

Diff: Easy

Objective: LO 10-2

AACSB: Refl ective thinking skills

5) An act of two or more employees to steal assets and cover their theft by misstating the accounting records would be referred to as:

A) collusion.

B) a material weakness.

C) a control deficiency.

D) a significant deficiency.

Answer: A

Terms: Employees steal assets

Diff: Easy

Objective: LO 10-2

AACSB: Ethical understanding and reasoning abilities

6) Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements?

A) A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting.

B) A statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting.

C) A statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting.

D) A statement that the external auditors are solely responsible.

Answer: A

Terms: Sarbanes-Oxl ey; Internal control report

Diff: Easy

Objective: LO 10-2

AACSB: Refl ective thinking skills

Topic: SOX

7) When management is evaluating the design of internal control, management evaluates whether the control can do which of the following?

Answer: C

Terms: Internal control design

Diff: Easy

Objective: LO 10-2

AACSB: Analytic skills

Topic: SOX

8) When one material weakness is present at the end of the year, management of a public company must conclude that internal control over financial reporting is:

A) insufficient.

B) inadequate.

C) ineffective.

D) inefficient.

Answer: C

Terms: Internal control weakness; Public company

Diff: Easy

Objective: LO 10-2

AACSB: Analytic skills

Topic: Public

9) The auditors primary purpose in auditing the client's system of internal control over financial reporting is:

A) to prevent fraudulent financial statements from being issued to the public.

B) to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements.

C) to report to management that the internal controls ar e effective in preventing misstatements from appearing on the financial statements.

D) to efficiently conduct the Audit of Financial Statements.

Answer: B

Terms: Primary purpose to audit system of internal control

Diff: Moderate

Objective: LO 10-2

AACSB: Analytic skills

Topic: Public

10) Management must disclose material weaknesses in internal control in its audit report:

A) whenever the weakness is deemed significant to a single class of transactions.

B) whenever the weakness is significant to overall financial reporting objectives.

C) if the weakness exists at the end of the year.

D) only if the auditor identifies the weakness as significant.

Answer: C

Terms: Material weaknesses in internal control

Diff: Moderate

Objective: LO 10-2

AACSB: Refl ective thinking skills

Topic: Public

11) In performing the audit of internal control over financial reporting the auditor emphasizes internal control over class of transactions because:

A) the accuracy of accounting system outputs depends heavily on the accuracy of inputs and processing.

B) the class of transaction is where most fraud schemes occur.

C) account balances are less important to the auditor then the changes in the account balances.

D) classes of transactions tests are the most efficient manner to compensate for inherent risk.

Answer: A

Terms: Internal control over class of transactions

Diff: Moderate

Objective: LO 10-2

AACSB: Refl ective thinking skills

Topic: Public

12) Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the:

A) adequacy of the computer system.

B) proper implementation by management.

C) ability of the internal audit staff to maintain it.

D) competency and dependability of the people using it.

Answer: D

Terms: Internal control effectiveness

Diff: Moderate

Objective: LO 10-2

AACSB: Ethical understanding and reasoning abilities

13) Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every:

A) transaction.

B) financial statement account.

C) material financial statement account.

D) financial statement account that will be relied upon by third parties.

Answer: C

Terms: Effectively designed internal controls; testing of controls

Diff: Moderate

Objective: LO 10-2

AACSB: Analytic skills

14) Of the following statements about internal controls, which one is least likely to be correct?

A) No one person should be responsible for the custodial responsibility and the recording responsibility for an asset.

B) Transactions must be properly authorized before such transactions are processed.

C) Because of the cost-benefit relationship, a client may apply controls on a test basis.

D) Control procedures reasonably ensure that collusion among employees cannot occur.

Answer: D

Terms: Internal control s

Diff: Moderate

Objective: LO 10-2

AACSB: Refl ective thinking skills

15) The Sarbanes-Oxley Act requires:

A) all public companies to issue reports on internal controls.

B) all public companies to define adequate internal controls.

C) the auditor of public companies to design effective ICFR.

D) the auditor of public companies to provide recommendations to correct material weaknesses. Answer: A

Terms: Sarbanes-Oxl ey Act

Diff: Challenging

Objective: LO 10-2

AACSB: Refl ective thinking skills

Topic: SOX

16) The financial statements may not correctly reflect accounting frameworks such as AAP or IFRS if the:

A) controls affecting the reliability of financial reporting are inadequate.

B) company's controls do not promote efficiency.

C) company's controls do not promote effectiveness.

D) company's controls do not promote compliance with applicable rules and regulations.

Answer: A

Terms: Financial statements refl ect accounting frameworks

Diff: Challenging

Objective: LO 10-2

AACSB: Refl ective thinking skills

17) The primary emphasis by auditors is on controls over:

A) classes of transactions.

B) account balances.

C) both A and B, because they are equally important.

D) both A and B, because they vary from client to client.

Answer: A

Terms: Primary emphasi s by auditors on control s

Diff: Challenging

Objective: LO 10-2

AACSB: Refl ective thinking skills

18) An auditor should consider two key issues when obtaining an understanding of a client's internal controls. These issues are:

A) the effectiveness and efficiency of the controls.

B) the frequency and effectiveness of the controls.

C) the design and implementation of the controls.

D) the implementation and efficiency of the controls.

Answer: C

Terms: K ey i ssues understanding client's internal controls

Diff: Challenging

Objective: LO 10-2

AACSB: Refl ective thinking skills

19) When a company designs and implements internal controls, cost of the controls is not a valid consideration.

A) True

B) False

Answer: B

Terms: Design and implement internal control; cost

Diff: Easy

Objective: LO 10-2

AACSB: Refl ective thinking skills

Learning Objective 10-3

1) Which of the following activities would be least likely to strengthen a company's internal control?

A) separating accounting from other financial operations

B) maintaining insurance for fire and theft

C) fixing responsibility for the performance of employee duties

D) carefully selecting and training employees

Answer: B

Terms: Not strengthen internal control

Diff: Easy

Objective: LO 10-3

AACSB: Analytic skills

2) Which of the following components of the control environment define the existing lines of responsibility and authority?

A) Organizational Structure

B) Management philosophy and operating style

C) Human resource policies and practices

D) Management integrity and ethical values

Answer: A

Terms: Control environment components; Responsibility and authority

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

3) Which of the following factors may increase risks to an organization?

Answer: A

Terms: Increase risk s to an organization

Diff: Moderate

Objective: LO 10-3

AACSB: Analytic skills

4) Which of the following statements is most correct with respect to separation of duties?

A) Employees should not have temporary and permanent custody of assets.

B) Employees who authorize transactions should not have custody of related assets.

C) It is permissible to allow an employee to open cash receipts and record those receipts.

D) Employees who authorize transactions should have recording responsibility for these transactions. Answer: B

Terms: Separation of duties

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

5) Authorizations can be either general or specific. Which of the following is not an example of a general authorization?

A) Automatic reorder points for raw materials inventory.

B) A sales manager's authorization for a sales return.

C) Credit limits for various classes of customers.

D) A sales price list for merchandise.

Answer: B

Terms: General or specific authorizations

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

6) Which of the following is correct with respect to the design and use of business documents?

A) Not all documents used for internal purposes need to be prenumbered.

B) Documents should be designed for single purposes only to avoid confusion in their use.

C) Documents should be designed to be understandable only by those who use them.

D) Documents designed for external use must be prenumbered.

Answer: D

Terms: Design and use of business documents

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

7) Which of the following best describes the purpose of control activities?

A) the actions, policies and procedures that reflect the overall attitudes of management

B) the identification and analysis of risks relevant to the preparation of financial statements

C) the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives

D) activities that deal with the ongoing assessment of the quality of internal control by management Answer: C

Terms: Control activiti es

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

8) Which of the following deal with ongoing or periodic assessment of the quality of internal control by management?

A) Quality monitoring activities

B) Monitoring activities

C) Oversight activities

D) Management activities

Answer: B

Terms: Quality of internal control

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

9) Which of the following best describes an entity's accounting information and communication system?

Answer: D

Terms: Accounting information and communication system

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

10) An audit procedure that would most likely be used by an auditor in performing tests of control procedures in which the segregation of functions and that leaves no "audit" trail is:

A) inspection.

B) observation.

C) reperformance.

D) reconciliation.

Answer: B

Terms: Tests of control procedures; segregation of functions

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

11) Internal controls normally include procedures designed to provide reasonable assurance that:

A) employees act with integrity when performing their assigned tasks.

B) transactions are executed in accordance with management's authorization.

C) decision processes leading to management's authorization of transactions are sound.

D) collusive activities would be detected by segregation of employee duties.

Answer: B

Terms: Internal control s; reasonabl e assurance

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

12) Which of the following is not one of the subcomponents of the control environment?

A) management's philosophy and operating style

B) organizational structure

C) adequate separation of duties

D) commitment to competence

Answer: C

Terms: Subcomponents of control environment

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

13) It is important for the CPA to consider the competence of the clients' personnel because their competence bears directly and importantly upon the:

A) cost/benefit relationship of the system of internal control.

B) achievement of the objectives of internal control.

C) comparison of recorded accountability with assets.

D) timing of the tests to be performed.

Answer: B

Terms: Competence of client personnel

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

14) Proper segregation of functional responsibilities calls for separation of:

A) authorization, execution, and payment.

B) authorization, recording, and custody.

C) custody, execution, and reporting.

D) authorization, payment, and recording.

Answer: B

Terms: Segregation of functional responsibilities

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

15) Which of the following is correct regarding management's documentation of internal controls?

A) inadequate documentation is not a control deficiency

B) documentation needs to focus on interim controls

C) documentation needs to have some focus on controls designed to detect fraud

D) documentation should only focus on system design

Answer: C

Terms: Documentation of internal control

Diff: Challenging

Objective: LO 10-3

AACSB: Refl ective thinking skills

16) Which of the following groups establishes and maintains the company's internal controls?

A) Internal auditors

B) Board of Directors

C) Management

D) Audit committee

Answer: C

Terms: Establishes and maintains company's internal control

Diff: Challenging

Objective: LO 10-3

AACSB: Refl ective thinking skills

17) The independent auditor should acquire an understanding of the internal audit function as it relates to the independent auditor's study and evaluation of internal control because the:

A) audit programs, working papers, and reports of internal auditors can often be used as a substitute for the work of the independent auditor's staff.

B) procedures performed by the internal audit staff may eliminate the independent auditor's need for an extensive study and evaluation of internal control.

C) work performed by internal auditors may be a factor in determining the nature, timing, and extent of the independent auditor's procedures.

D) understanding of the internal audit function is an important substantive test to be performed by the independent auditor.

Answer: C

Terms: Understanding of internal audit functions

Diff: Challenging

Objective: LO 10-3

AACSB: Analytic skills

18) To promote operational efficiency, the internal audit department would ideally report to:

A) line management.

B) senior management.

C) Chief Accounting Officer.

D) audit committee.

Answer: D

Terms: Operational effici ency

Diff: Challenging

Objective: LO 10-3

AACSB: Refl ective thinking skills

19) Hanlon Corp. maintains a large internal audit staff that reports directly to the chief financial officer. Audit reports prepared by the internal auditors indicate that the system is functioning as it should and that the accounting records are reliable. An independent auditor will probably:

A) eliminate tests of controls.

B) increase the depth of the study and evaluation of administrative controls.

C) avoid duplicating the work performed by the internal audit staff.

D) place limited reliance on the work performed by the internal audit staff.

Answer: D

Terms: Internal audit

Diff: Challenging

Objective: LO 10-3

AACSB: Analytic skills

20) External financial statement auditors must obtain evidence regarding what attributes of an internal audit (IA) department if the external auditors intend to rely on IA's work?

A) Integrity

B) Objectivity

C) Competence

D) All of the above

Answer: D

Terms: External auditor reliance on internal auditors' work

Diff: Challenging

Objective: LO 10-3

AACSB: Refl ective thinking skills

21) To obtain an understanding of an entity's control environment, an auditor sh ould concentrate on the substance of management's policies and procedures rather than their form because:

A) management may establish appropriate policies and procedures but not act on them.

B) the board of directors may not be aware of management's attitude toward the control environment.

C) the auditor may believe that the policies and procedures are inappropriate for that particular entity.

D) the policies and procedures may be so weak that no reliance is contemplated by the auditor. Answer: A

Terms: Substance of management's policies and procedures

Diff: Challenging

Objective: LO 10-3

AACSB: Analytic skills

22) Control activities help assure that the necessary actions are taken to address risks to the achievement of the company's objectives. List the five types of control activities.

Answer:

1.Adequate separation of duties

2.Proper authorization of transactions and activities

3.Adequate documents and records

4.Physical control over assets and records

5.Independent checks on performance

Terms: Control activiti es

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

Topic: Public

23) Certain principles dictate the proper design and use of documents and records. Briefly describe several of these principles.

Answer:

?Documents should be prenumbered consecutively to facilitate control over missing documents and as an aid in locating documents when they are needed at a later date.

?Documents and records should be prepared at the time a transaction takes place, or as soon as possible thereafter, to minimize timing errors.

?Documents and records should be designed for multiple uses, when possible, to minimize the number of different forms. For example, a properly designed and used shipping document can be the basis for releasing goods from storage to the shipping department, informing billing of the quantity of goods to bill to the customer and the appropriate billing date, and updating the perpetual inventory records.

?Documents and records should be constructed in a manner that encourages correct preparation. This can be done by providing internal checks within the form or record. For example, computer screen prompts may force online data entry of critical information before record is electronically routed for authorizations and approvals. Similarly, screen controls can validate the information entered, such as when an invalid general ledger account number is automatically rejected when the account number does not match the chart of accounts master file.

Terms: Principles for design and use of documents and records

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

24) Management's identification and analysis of risk is an ongoing process and is a critical component of effective internal control. An important first step is for management to identify factors that may increase risk. Identify at least five factors, observable by management, which may lead to increased risk in a typical business organization.

Answer: There are many factors that may lead to increased risk in an organization. Some examples include:

?failure to meet prior objectives,

?quality of personnel,

?geographic dispersion of company operations,

?significance and complexity of core business processes,

?introduction of new information technologies, and

?entrance of new competitors.

Terms: Factors which may l ead to increased risk

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

25) Separation of duties is essential in preventing errors and intentional misstatements on the financial statements. List below the four general guidelines.

Answer:

1.Separation of custody of the assets from accounting

2.Separation of the authorization of transactions from custody of related assets

3.Separation of operational responsibility from record keeping responsibility

4.Separation of IT duties from user departments

Terms: General guidelines for separation of duties

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

26) In developing an understanding of the client's accounting information system the auditor follows a sequential process. Describe the process below:

Answer:

1.Major classes of transactions of the entity

2.How these transactions are initiated and recorded

3.What accounting records exist and their nature

4.How the system captures other events that are significant to the financial statements

5.The nature and details of the financial reporting process followed

Terms: Sequential process

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

27) The internal control framework developed by COSO includes five so-called "components" of internal control. Discuss each of these five components.

Answer: Five components of internal control are:

?The control environment. The control environment consists of the actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about internal control and its importance to the company.

?Risk assessment. This is management's identification and analysis of risks relevant to the preparation of financial statements in conformance with appropriate accounting standards.

?Information and communication. The purpose of the entity's system is to initiate, record, process, and report the entity's transactions and to maintain accountability for the related assets.

?Control activities. These are the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives.

?Monitoring. This is management's ongoing and periodic assessment of the quality of internal control by management to determine that controls are operating as intended and that they are modified as appropriate for changes in conditions.

Terms: Internal control framework; COSO

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

28) Discuss what is meant by the term "control environment" and identify four control environment subcomponents that the auditor should consider.

Answer: The control environment consists of the actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about control and its importance to the entity. Subcomponents include integrity and ethical values, commitment t o competence, board of directors or audit committee participation, management's philosophy and operating style, organizational structure, assignment of authority and responsibility and human resource policies and practices. Terms: Control environment

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

29) Adequate separation of duties is an important control activity. Discuss the four general guidelines for separation of duties to prevent both intentional and unintentional misstatements that are of significance to auditors.

Answer: The general guidelines are:

?Custody of assets should be separated from accounting,

?Authorizing transactions should be separated from custody of related assets,

?Operational responsibility should be separated from record-keeping, and

?IT duties should be separated from user departments.

Terms: Separation of duties

Diff: Challenging

Objective: LO 10-3

AACSB: Refl ective thinking skills

30) As a client's information system becomes more complex, it is likely that an auditor will increase reliance on controls and decrease substantive tests to support a control risk assessment.

A) True

B) False

Answer: A

Terms: Complex information system

Diff: Easy

Objective: LO 10-3

AACSB: Analytic skills

31) Adequate documents and records is a subcomponent of the control environment.

A) True

B) False

Answer: B

Terms: Control environment

Diff: Easy

Objective: LO 10-3

AACSB: Refl ective thinking skills

32) The chart of accounts is a control and is closely related to the controls related to adequate documents and records.

A) True

B) False

Answer: A

Terms: Chart of accounts

Diff: Easy

Objective: LO 10-3

AACSB: Refl ective thinking skills

33) Auditing standards prohibit reliance on the work of internal auditors due to the lack of independence of the internal auditors.

A) True

B) False

Answer: B

Terms: Auditing standards; internal auditors

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

34) If an auditor wishes to rely on the work of internal auditors (IA), the auditor must obtain satisfactory evidence related to the IA's competence, integrity, and objectivity.

A) True

B) False

Answer: A

Terms: Internal auditors

Diff: Moderate

Objective: LO 10-3

AACSB: Refl ective thinking skills

Learning Objective 10-4

1) When the auditor attempts to understand the operation of the accounting system by tracing a few transactions through the accounting system, the auditor is said to be:

A) tracing.

B) vouching.

C) performing a walk-through.

D) testing controls.

Answer: C

Terms: Tracing transactions through accounting system

Diff: Easy

Objective: LO 10-4

AACSB: Analytic skills

Chapter1会计概论答案

第一章会计透视：会计信息及其使用者▓复习思考题 1．概述会计的性质。 会计是按照会计规范确认、计量、记录一个组织的经济活动，运用特定程序处理加工经济信息，并将处理结果传递给会计信息使用者的信息系统，是组织和总结经济活动信息的主要工具。 会计是一个信息系统，会计处理的各个环节的加工的对象是会计信息。会计信息实际上是一种广义的信息，包含三个层次： 其一，以货币化指标体现的财务信息，它是从动态、静态两个角度，对特定主体经济资源的数量（资产）、归属（负债、所有者权益）、运用效果（收益分配）、增减变化及其结果（财务状况变动及其结果）进行描述； 其二，非货币化的和非数量化的说明性信息，它们不仅仅是对主体的财务状况、经营成果等财务指标的基本说明，而且还包含了大量的主体所处的社会、文化、道德、法律等环境信息，这些信息对于使用者正确判断主体的经营能力、发展前景，往往起到至关重要的作用； 其三，其他用于主体内部管理的信息，这些信息常常由成本会计、管理会计以及内部审计人员提供，主要包括了短期（长期）决策信息、预算信息、责任中心要求及履行情况等情况，虽然与外部性较强的财务会计信息相比，它们更容易为人们所忽略，但在经济管理和财务信息质量控制方面，它们也起了不可低估的作用。不过，在当前的会计报告模式中，所反映的会计信息主要是前两个层次上的信息。 2．企业的获利能力是否为债权人的主要考虑因素？ 债权人关心那些影响自己的债权能否得到按期偿还的因素。他们会对公司的获利能力及清偿能力感兴趣。债权人会从获利能力去衡量未来的现金流量，由于企业的获利能力与现金流量并不一定同步产生，所以对短期债权人来说，企业的获利能力不能成为债权人的主要考虑因素，但对相对长期的债权人来说获利能力应该是值得更加关注的因素。 3．财务报表中体现出来的会计信息用以满足不同使用群体的需求，但并不是所有的使用者都能得到相同的满足的。在实践中，外部财务报表使用者诸如股东、供应商、银行等是如何获得有关公司的财务信息的？若要同时满足不同类别的财务报表使用者的信息需求有什么困难？ 首先，股东是公司法定的所有者，法律上财务报表是为其制作的。法律规定，公司必须定期编制并发布财务报表，为其股东公布财务信息，我国《公司法》对此也有明确的规定。 其次，供应商与公司是商业伙伴关系，不提供商业信用的供应商，由于是钱货两讫，可通过报媒和网络了解公司公开财务的财务信息，如果供应商对公司提供商业信用，供应商可要求企业提供一定的财务信息，但对这些财务信息的准确性、可靠性需要有一定的分析。