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Auditing

Instructions:

Answer 41 questions in 15 minutes.
If you are not ready to take this test, you can study here.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. Authorization - Independent Checks on Performance - Separation of Duties - Physical Control of Assets and Records - Adequate Documents and Records
Two Levels of Internal Controls
Five Elements of Internal Control
Business Process Controls
Inherent Risk

2. Avoidance (of activities) - Acceptance (inevitable - unavoidable) - Insurance (transferred through assurance or risk sharing) - Reduction (by implementing proactive procedures-internal control)
ERM: Top Down Approach Step 2
External Threat Analysis
Step 3: Residual Risk Analysis
Strategies for Managing Risk

3. Most of the reference to risk concerns the company's risk of survival and includes any threat to an organization that reduces the likelihood that the organization will achieve one or more of its objectives. It is measured in terms of probability (lik
Assertions of Management
Internal Control auditors
ERM: Risk
Internal Control

4. The susceptibility of the financial statements to material error assuming no internal control
Step 3: Residual Risk Analysis
Control Risk
Components of ARM
Inherent Risk

5. Assessment of whether a client's internal control structure is effective for preventing and/or detecting errors
Step 3: Residual Risk Analysis
Control Risk
Management controls
Sources of Risk

6. Residual Risk Analysis (linkage of risk to audit objectives)
Limitations on Management Controls
ERM: Top Down Approach Step 2
ERM: Top Down Approach Step 3
ERM: Top Down Approach Step 1

7. Existence/Occurrence - Rights/Obligations - Valuation/Allocation - Completeness - Presentation/Disclosure
Business Process Controls
High Residual Risks
Assertions of Management
External Threat Analysis

8. Its a systematic and continuous process. Risk management is iterative where control is temporary and depends on current circumstances - not a permanent condition
Assertions of Management
Five Elements of Internal Control
Internal Control
Risk Management Process type

9. Strategic Risk Analysis (external focus)
Components of ARM
Internal Control Objectives
ERM: Top Down Approach Step 1
Risk Management Process

10. Process Map(outlines each process) - Internal Threat Analysis(analyze each process) - Process(an organized unit within the company that has to accomplish a goal set by management) - Audit-Sensitive Processes(based on assessment auditor identifies cri
Risk Monitoring
Residual Risks
Step 2: Process Risk Analysis
Limitations on Management Controls

11. Documentation or Inspection of Records and Documents -Observation -Physical Examination or Inspection of Tangible Assets -Client Inquiry (do not use Independent Inquiry) -Confirmation -Recalculation and Reperformance -Analytical Procedures
Two Levels of Internal Controls
Five Elements of Internal Control
Types of Evidence
ERM: Top Down Approach Steps per level

12. Leadership - integrity - regulatory - technology - financial planning - human resource - operational - information
Business Process Controls
Two Levels of Internal Controls
Risk Management Process type
Risk Identification

13. Pinpoints problems that show up in financial results - may suggest financial misstatements - may raise concerns about the viability of the company - may indicate a potential threat to the internal control environment - may highlight potential client
Two Levels of Internal Controls
Inherent Risk
Internal Threat Analysis
High Residual Risks

14. Activities performed by senior management including strategic direction and planning and evaluating the overall performance of the organization by providing feedback about potential problems or risks that should be addressed
Management controls
Internal Control attributes
Residual Risks
Types of Evidence

15. Control over the organization by individuals external to org(customers - suppliers - board of directors - regulatory agencies - external audits - owners)
Internal Control
ERM: Risk
External Controls
Risk Management Process type

16. Failure to communicate mission and objectives - Inaccurate or out of date assumptions - Undue focus on current conditions - Rigid organizational structure - Failure to enforce accountability - Communication breakdowns
OBM
Limitations on Management Controls
Risk Management Process type
Process Maps

17. Competitive Environment - Management or Employee Improper or Incompetent Actions - Process Breakdowns Within Organization - Inaccurate Processing of Information
High Residual Risks
Internal Threat Analysis
Sources of Risk
ERM: Top Down Approach Steps per level

18. Control Environment - Risk Assessment - Control Activities - Information and Communication - Monitoring
Five Elements of Internal Control
Types of Evidence
Internal Control SOA requirements (management)
ERM: Risk

19. Process Objectives(statement of what the process is trying to achieve) - Process Activities(reflect actions and steps performed to accomplish process objectives) - Process Data Streams(Information need and outputs of the process) - Accounting Impact
Process Maps
Risk Monitoring
Internal Threat Analysis
Five Elements of Internal Control

20. Assess the impact of process risks and the associated internal controls - Risk Identification - Risk Mitigation - Risk Monitoring
Business Process Controls
Risk Management Process type
Internal Control
Internal Threat Analysis

21. Diagnosticity - objectivity
Strategies for Managing Risk
Inherent Risk
Internal Control SOA requirements (management)
Attributes that influence effectiveness of control mechanism

22. Risk the auditor is willing to take that the audit procedures will fail to find material errors that were not detected by internal control
Planned Detection Risk
Step 3: Residual Risk Analysis
Internal Threat Analysis
Internal Control auditors

23. A process - management's responsibility - provides reasonable assurance to to inherent limitations (human failure - collusion - bypassing of control by senior management)
Limitations on Management Controls
Residual Risks
Internal Control auditors
Internal Control attributes

24. Responsible for giving an opinion of management's report on internal control - and must assess if the client's internal controls being used to effectively control risks
Internal Control SOA requirements (auditor)
External Threat Analysis
Acceptable Audit Risk
Risk Identification

25. Auditors primary concern - most likely source of problems - reflect current conditions of threats - reflect areas where the auditor needs to focus most of auditing efforts
Assertions of Management
Risk Mitigation
Residual Risks
Internal Control Objectives

26. Identify Risks - Identify Management's Response - Asses Residual Risk (Separate What is and is not important)
Components of ARM
ERM: Top Down Approach Steps per level
ERM: Top Down Approach Step 1
Business Process Controls

27. Authorization(relates to ownership and existence) - Existence - Completeness - Accuracy (relates to valuation) - Timing (relates to completeness) - Posting and Summarization (relates to valuation)
Assertions of Management
Internal Control Objectives
Control Risk
Limitations on Management Controls

28. Identifies measures of performance to assess whether process risks are and immediate threat
Risk Monitoring
Two Levels of Internal Controls
Risk Identification
OBM

29. Process designed by management to provide reasonable insurance - within economic limits - that the organization's objectives are being met
Inherent Risk
Limitations on Management Controls
ERM: Risk
Internal Control

30. Must state their responsibilities for establishing and maintaining internal controls and report on an evaluation of effectiveness of the controls within 90 days prior to periodic reports - state that signing officers have disclosed to auditors and c
ERM: Top Down Approach Step 3
Internal Control SOA requirements (management)
Step 3: Residual Risk Analysis
Acceptable Audit Risk

31. Organizational Business Models - External Threat Analysis
Types of Evidence
Assertions of Management
Step 1: Strategic Risk Analysis
Sources of Risk

32. Planned Detection Risk - Acceptable Audit Risk - Inherent Risk - Control Risk
Internal Threat Analysis
Sources of Risk
Risk Management Process
Components of ARM

33. Risk that the auditor is willing to take that the financial statements are not fairly stated after the quit
External Controls
Acceptable Audit Risk
Risk Management Process type
Internal Control attributes

34. Management Controls Systems over Management Processes - Business Process Control Systems over Business Processes
Components of ARM
Step 3: Residual Risk Analysis
Step 1: Strategic Risk Analysis
Two Levels of Internal Controls

35. Markets - Competitors(adv/dis) - Resources - Internal Processes - External Agents - Strategic Partners - low cost or diff - broad or narrow group of consumers
Risk Management Process type
OBM
Step 3: Residual Risk Analysis
Types of Evidence

36. Risk Assessment - Response by Management - Information Reliability - Performance Results - Reaction by Management
Business Process Controls
Risk Management Process
ERM: Top Down Approach Step 3
Management controls

37. Examine internal control as part of audit process to determine reliability of info processing related to transactions - and to access control risk involving (management decision making - process monitoring - compliance)
Strategies for Managing Risk
Internal Control auditors
Process Maps
External Threat Analysis

38. Authorization - adequate documents and records - safeguarding of assets and records - independent checks on performance - separation of duties
Internal Control Objectives
Risk Identification
Risk Mitigation
Risk Management Process type

39. Industry (competitors - potential entrants - substitutes - suppliers - customers) - Macro environmental Forces (Political - Economic - Social - Technological)
ERM: Top Down Approach Step 2
External Threat Analysis
Internal Control Objectives
Assertions of Management

40. Process Risk Analysis (internal focus)
External Controls
ERM: Top Down Approach Step 2
Risk Management Process
Strategies for Managing Risk

41. Assess probability of the event happening and potential damage - Consider whether internal controls have mitigated the inherent problems of the risk - Identify the high residual risks that will be major focus of audit
Risk Identification
Step 3: Residual Risk Analysis
Attributes that influence effectiveness of control mechanism
Internal Control SOA requirements (management)