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Audit Chapter 7 Exam Questions and Answers All Correct

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Audit Chapter 7 Exam Questions and Answers All Correct Which statement is correct concerning the relevance of various types of controls to a financial statement audit? A. An auditor may ordinarily ignore the consideration of controls when a substantive audit approach is used. B. Controls over ...

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  • September 12, 2024
  • 15
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • audit
  • audit chapter 7 exam
  • audit chapter 7 exam questions and answers

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Audit Chapter 7 Exam Questions
and Answers All Correct
Which statement is correct concerning the relevance of various types of controls to a
financial statement audit?
A. An auditor may ordinarily ignore the consideration of controls when a substantive
audit approach is used.
B. Controls over the reliability of financial reporting are ordinarily most directly relevant
to an audit, but other controls may also be relevant.
C. Controls over safeguarding assets and liabilities are of primary importance, while
controls over the reliability of financial reporting may also be relevant.
All controls are ordinarily relevant to an audit. - Answer ✔ B. Controls over the reliability
of financial reporting are ordinarily most directly relevant to an audit, but other controls
may also be relevant.

Which of the following is not a component of the control environment?
A. Integrity and ethical values.
B. Risk assessment.
C. Commitment to competence.
D. Organizational structure. - Answer ✔ B. Risk assessment.

Which of the following is not ordinarily considered a factor indicative of increased
financial reporting risk when an auditor is considering a client's risk assessment
policies?
A. Salaried sales personnel.
B. Implementation of a new information system.
C. Rapid growth of the organization.
D. Corporate restructuring. - Answer ✔ A. Salaried sales personnel.

The Sarbanes-Oxley Act of 2002 requires that the audit committee:
A. Annually reassess control risk using information from the CPA firm.
B. Be directly responsible for the appointment, compensation and oversight of the work
of the CPA firm.
C. Require that the company's CPA firm rotate the partner in charge of the audit.
D. Review the level of management compensation. - Answer ✔ B. Be directly
responsible for the appointment, compensation and oversight of the work of the CPA
firm.

When tests of controls reveal that controls are operating as anticipated, it is most likely
that the assessed level of control risk will:

, A. Be less than the preliminary assessed level of control risk.
B. Equal the preliminary assessed level of control risk.
C. Equal the actual control risk.
D. Be less than the actual control risk. - Answer ✔ B. Equal the preliminary assessed
level of control risk.

Under which circumstance is it likely that the extent of substantive procedures will be
expanded beyond that anticipated in the audit plan?
A. The auditors have determined that controls have been implemented (placed in
operation) but, in accordance with the audit plan, have performed no tests of controls.
B. Certain controls do not leave a trail of documentary evidence.
C. Deviation rates were greater than zero and approached anticipated levels.
D. The operating effectiveness of certain controls was found to be less than expected,
although no material misstatements were identified. - Answer ✔ D. The operating
effectiveness of certain controls was found to be less than expected, although no
material misstatements were identified.

The provisions of the Foreign Corrupt Practices Act apply to:
A. All U.S. corporations.
B. All U.S. corporations that engage in foreign operations.
C. All corporations that must file under the Securities Exchange Act of 1934.
D. All U.S. partnerships and corporations. - Answer ✔ C. All corporations that must file
under the Securities Exchange Act of 1934.

If the auditors do not perform tests of controls for certain assertions:
A. They have performed a substandard audit.
B. They are not required to communicate significant deficiencies relating to those
accounts to management and the board of directors.
C. They must issue a qualified opinion.
D. They must assess control risk at the maximum level for those assertions. - Answer ✔
D. They must assess control risk at the maximum level for those assertions.

During financial statement audits, the auditors' consideration of their clients' internal
control is integral to both assess the risk of material misstatement and to:
A. Assess inherent risk.
B. Design further audit procedures.
C. Assess compliance with the Foreign Corrupt Practices Act.
D. Provide a reasonable basis for an opinion on compliance with applicable laws. -
Answer ✔ B. Design further audit procedures.

Which of the following comes closest to outlining the auditors' responsibility for
considering internal control in all financial statement audits?
A. An understanding of the control environment, information and communication, risk
assessment and monitoring is necessary; an understanding of control activities is only
necessary for areas in which the auditor is performing tests of controls.

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