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  • At 12

    Transféré par

    Gellie Vale T. Managbanag
    39 vues3 pages
    This is chapter 12.

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    AT-12

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    This is chapter 12.

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    39 vues3 pages

    At 12

    Transféré par

    Gellie Vale T. Managbanag
    This is chapter 12.

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 3
    See Jose M. Ireneo » George B. James AT-12: UNDERSTANDING OF THE ENTITY'S INTERNAL CONTROL REQUIRED READINGS + Chapter 8, Audit Planning, Auditing and Assurance Principles 2012 Edition (Ireneo, Ireneo, James) + PSA 315 (Redrafted): Identifying and Assessing The Risks of Material Misstatement Through Understanding The Entity and Its Environment 2 _ PSA Glossary of Terms, 1, This is the process designed and effected by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of the entity’s ‘objectives on financial reporting, operations and compliance. A. Strategies C. Internal controls B. Operating plans D. Risk assessments D 2. According to PSA 315, the auditor uses the understanding of internal control to: A. Identify types of potential misstatements. B. Consider factors that affect the risk of material misstatements C. Design the nature, timing and extent of further audit procedures (i.e., tests of controls and substantive tests) D. All of these. The primary purpose of the auditor’s consideration of internal control is to provide a basis for ‘A. Determining whether procedures and records that are concerned with the safeguarding of assets are reliable. B. Constructive suggestions to clients concerning deficiencies in internal control. C. Determining the nature, timing and extent of audit tests to be applied. D. The expression of an opinion. 4, In an audit of financial statements, an auditor's primary consideration regarding a control is whether it: A. Enhances management's decision-making processes. B. Reflects management's philosophy and operating style. 4. Affects management's financial statement assertions. D. Provides adequate safeguards over access to assets. 5. What is the relationship between an entity's objectives and the controls it implements to provide reasonable assurance about their achievement? A. Direct. C. Adverse. B. Inverse D. Cannot be determined. 6. An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about: A. The efficiency of management's decision-making process. B. Appropriate prices the entity should charge for its products. C. Methods of assigning production tasks to employees. -D. The entity's ability to process and summarize financial data. 7. These controls may also be relevant to the audit if the external auditor intends to make use of company-produced information in designing and performing further audit procedures (tests of controls and substantive tests): ‘A. Controls over completeness and consistency. B. Controls over existence and occurrence. -C. Controls over completeness and accuracy. D. Controls over presentation and disclosure 8. The following are components of internal control: A. Organizational structure, management philosophy, and planning. _ B.. Legal environment of the firm, management philosophy, and organizational structure. CC. Risk assessment process, backup facilities, responsibility accounting and natural laws, 7D. Control environment, risk assessment process, control activities, information system and communication, and monitoring of controls. 9. Which of the following statements best describes “contro! environment”? A. The entity's process for identifying business risks relevant to financial reporting objectives and deciding about actions to address those risks, and the results thereof. B. The system for transferring information from transaction processing systems to the general ledger or the financial reporting system. C. Policies and procedures that help ensure that management directives are carried out. _-: This includes the governance and management functions and the attitudes, awareness, ‘and actions of those charged with govemance and management concerning the entity's internal control and its importance to the entity. 10, Management's attitude towards aggressive financial reporting and its emphasis on meeting rojected profit goals most likely would significantly influence an entity's contrat environment when: ‘A, Management is dominated by one individual who is also a shareholder. B. External policies established by parties outside the entity affect its accounting practices. C. The audit committee is active in overseeing the entity's financial reporting policies: 7D. Internal auditors have direct access to the board of directors and entity management, 11. An entity's risk assessment process includes how management: A. Identifies business risks relevant to financial reporting objectives B. Estimates the significance of the risks C. Assesses the likelihood of the occurrence of risks D. Decides on actions to address the risks. 7€. All of the choices. 12. Risks can arise or change due to circumstances such as the following, except: ‘A. There is a change in the regulatory or operating environment. _-B. No new employees have been hired by the company. C. The company switched from manual information systems to a computerized system. D. The accounting and financial reporting framework has experienced significant revisions. 13. The information system consists of the following: ‘A. Infrastructure (physical and hardware components) and software B. People C. Procedures and data 7D. All of these. 14. The objective of the recording function of transactions (in the context of internal accounting control) 1s to ‘A. Limit access to assets and to permit preparation of financial statements in accordance with GAAP. B. Assure compliance with the rules of all regulatory bodies having jurisdiction over the reporting entity. C. Permit preparation of financial statements in accordance with GAAP and to maintain accountability of assets. p. Encourage operational efficiency and adherence to prescribed managerial policies. 15, Which of the following statements describe reporting? ‘A. Identifying and capturing the relevant information for transactions or events. B. Editing and validation, calculating, measuring, valuing, summarizing, and reconciling functions. C. The preparation of financial reports as well as other information, in electronic or printed format, that the entity uses in measuring and reviewing the entity's financial performance. Ail of these statements describe the recording function, th of the following descriptions pertain to physical controls? Control activities that include reviews and analyses of actual performance versus budgets, forecasts, and prior period performance. 7B. Controls performed to check accuracy, completeness, and authorization of transactions. C. Physical security of assets, including adequate safeguards such as secured facilities ‘over access to assets and records D. The assignment of incompatible functions to different people. E. Control activities involving the specific or general authorization of a transaction. 17.Which of the following would be preventive controls? ‘An. The use of batch totals. . Reconciling the accounts receivable subsidiary file with the control account. Requirement that two persons open mail ‘paecsnsummihe dill illic nia as ta al nt hs 1 ee D. Preparation of bank reconciliation. 18. An example of specific transaction authorization is the A. Setting of automatic reorder points. B. Establishment of sales prices. CC. Establishment of a customer's credit limits, 7D. Approval of a construction budget for a new warehouse. 19.A proper segregation of duties requires: A. That an individual authorizing a transaction should record it also. B. That an individual authorizing a transaction maintain custody of the asset that resulted from the transaction. C. That an individual maintaining custody of an asset be entitled to access the accounting records for the asset. ~D. That different individuals should handle custody, authorization and record-keeping. 20.A process implemented by management to assess the effectiveness of internal control performance over time. A. Monitoring of controls C. Tests of controls B. Quality control system D. Risk assessment procedures 21.An entity’s ongoing monitoring activities often include: A. Periodic audits by the audit committee. B. Reviewing the purchasing function.

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