Started on Wednesday, 23 March 2022, 10:01 AM

State Finished
Completed on Wednesday, 23 March 2022, 11:18 AM
Time taken 1 hour 17 mins
Marks 32.50/50.00
Grade 6.50 out of 10.00 (65%)
窗体顶端
Question  1

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Proper segregation of functional responsibilities calls for separation of

Select one:

A.

authorization, execution, and payment.

B.

authorization, payment, and recording.

 C.

custody, execution, and reporting.

D.

authorization, recording, and custody.

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The correct answer is: authorization, recording, and custody.

Question  2

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Which of the following best describes effective internal control over payroll?

Select one:

A.
 The confidentiality of employee payroll data should be carefully protected to prevent fraud.

B.

The duties of hiring, payroll computation, and payment to employees should be segregated.

C.

The preparation of the payroll must be under the control of the personnel department.

D.

The payment of cash to employees should be replaced with payment by checks.

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The correct answer is: The duties of hiring, payroll computation, and payment to employees
should be segregated.

Question  3

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Question text

For effective internal control, the accounts payable department generally should

Select one:

A.

establish the agreement of the vendor’s invoice with the receiving report and
purchase order.

B.

ascertain that each requisition is approved as to price, quantity, and quality by

an authorized employee.

C.

omit information about the quantity ordered on the copy of the purchase order
forwarded to the receiving department prior to receipt of goods.

D.

stamp, perforate, or otherwise cancel supporting documentation after payment

is mailed.

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The correct answer is: establish the agreement of the vendor’s invoice with the receiving report
and
purchase order.
Question  4

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The following are examples of internal controls which operate at Castle Ltd. For each example,
select the type of control activity which it illustrates.

The receivables ledger clerk posts invoices to the

receivables ledger. The cash clerk posts cash receipts to Answer
the receivables ledger. 1

The financial controller conducts a monthly review of Answer

authorization controls over dispatch notes. 2

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The correct answer is: The receivables ledger clerk posts invoices to the receivables ledger. The
cash clerk posts cash receipts to the receivables ledger. → Segregation of duties, The financial
controller conducts a monthly review of authorization controls over dispatch notes. → Information
processing

Question  5

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You are considering using the work of the internal auditors of ABC Ltd.

Which one of the following facts identified in the review of the internal audit function will give you
confidence that the internal auditor is technically competent?

Select one:

A.

The head of internal audit is free from the influences of operational management.

B.

The head of internal audit is a professionally trained auditor and a member of the Institute of
Internal Auditors.

C.

The internal audit function regularly examines controls over all the significant accounting
operations that affect the financial statements.

D.
 The head of internal audit has a direct reporting line to the audit committee.

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The correct answer is: The head of internal audit is a professionally trained auditor and a member
of the Institute of Internal Auditors.

Question  6

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The accounts payable department usually has responsibility for approving acquisitions for
payment by comparing the details on the

Select one:

A.

purchase order, receiving report, and vendor's invoice.

B.

vendor's invoice and the receiving report.

 C.

purchase requisition, purchase order, and receiving report.

D.

vendor's invoice and the purchase requisition.

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The correct answer is: purchase order, receiving report, and vendor's invoice.

Question  7

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

Select one:
 A.

The documents should be in paper format.

B.

Documents should be designed for a single purpose to avoid confusion in their use.

C.

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

D.

Documents should be prenumbered consecutively to facilitate control over missing documents.

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The correct answer is: Documents should be prenumbered consecutively to facilitate control over
missing documents.

Question  8

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When examining payroll transactions, an auditor is primarily concerned with the possibility of

Select one:

A.

incorrect summaries of employee time records.

B.

posting of gross payroll amounts to incorrect salary expense accounts.

C.

under withholding of amounts required to be withheld.

D.

overpayments and unauthorized payments.

 Feedback

The correct answer is: overpayments and unauthorized payments.

Question  9

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Internal controls

Select one:

A.

guarantee that the company complies with all laws and regulations.

B.

are implemented by and are the responsibility of the auditors.

 C.

only apply to SEC companies.

D.

consist of policies and procedures designed to provide reasonable assurance that the company
achieves its objectives and goals.

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The correct answer is: consist of policies and procedures designed to provide reasonable
assurance that the company achieves its objectives and goals.

Question  10

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A major reason for establishing an internal audit activity is to:

Select one:

A.
 Ensure the reliability and integrity of financial and operational information.

B.

Evaluate and improve the effectiveness of control processes.

C.

Relieve overburdened management of the responsibility for establishing effective controls.

D.

Safeguard resources entrusted to the organization.

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The correct answer is: Evaluate and improve the effectiveness of control processes.

Question  11

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Question text

Which of the following activities related to internal auditing are the responsibility of the Chief
Audit Executive, rather than the board? Select which two options are correct.

Select one or more:

A.

confirm the independence of the internal audit activity

B.

evaluate the potential for occurrence of fraud

C.

develop and control a quality assurance program for internal audit

D.

approve the risk based internal audit plan

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 The correct answers are: confirm the independence of the internal audit activity, develop and
control a quality assurance program for internal audit

Question  12

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The following describes processes which make up the purchases system at Hawthorns and Co.

For each process, select whether it represents a strength or a deficiency of the system.

Invoices for services are checked against the service

provider's proof of delivery of service, which is requested Answer
from every service provider. 1

Orders are placed by department heads, usually by Answer

telephone, when they determine a service is required. 2
Payments are made by direct transfer. The direct transfer
list is authorized by the financial controller, who checks Answer
the payments to supporting documents, such as the invoice 3
or service agreement.

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The correct answer is: Invoices for services are checked against the service provider's proof of
delivery of service, which is requested from every service provider. → Strength, Orders are placed
by department heads, usually by telephone, when they determine a service is required. →
Deficiency, Payments are made by direct transfer. The direct transfer list is authorized by the
financial controller, who checks the payments to supporting documents, such as the invoice or
service agreement. → Strength

Question  13
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Which of the following is an internal control that will prevent paid cash disbursement documents
from being presented for payment a second time?

Select one:

Select one:

A.

The date on cash disbursement documents must be within a few days of the date that the
document is presented for payment

B.

Cash disbursement documents are approved by at least two responsible management officials

C.

Unsigned checks are prepared by individuals who are responsible for signing checks
 D.

The official signing the check compares the check with the documents and should deface the
documents

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The correct answer is: The official signing the check compares the check with the documents and
should deface the documents

Question  14

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Which of the following is not an accurate statement regarding the acquisition and payment cycle?

Select one:

A.

The personnel in the receiving department should be independent of the storeroom personnel.
 B.

Accounting records should transfer responsibility for the goods each time they are moved.

C.

The accounting department should be responsible for receiving goods and preparing the
receiving report.

D.

Goods received should be physically controlled from the time of their receipt until their use or
disposal.

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The correct answer is: The accounting department should be responsible for receiving goods and
preparing the receiving report.

Question  15

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Which two of the following are reasons why organisations need to have effective systems of
control?

To help the organisation in:

Select one or more:

A.

complying with laws and regulations

B.

managing its assets and liabilities

C.

minimizing business risks

D.

cutting down the time needed for the audit

 E.

maximizing its profitability

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The correct answers are: minimizing business risks, complying with laws and regulations

Question  16

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Budd, the purchasing agent of Lake Hardware Wholesalers, has a relative who owns a retail
hardware store. Budd arranged for hardware to be delivered by manufacturers to the relative’s
retail store on a COD basis, thereby enabling his relative to buy at Lake’s wholesale prices. Budd
was probably able to accomplish this because of Lake’s poor internal control over

Select one:

Select one:

A.

Perpetual inventory records

 B.

Purchase requisitions

C.

Purchase orders

D.

Cash receipts

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The correct answer is: Purchase orders

Question  17

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 Which of the following statements related to application controls is correct?

Select one:

A.

Application controls relate to various aspects of the IT function including software acquisition and
the processing of transactions.

B.

Application controls relate to various aspects of the IT function including physical security and the
processing of transactions in various cycles.

C.

Application controls relate to all aspects of the IT function.

D.

Application controls relate to the processing of individual transactions.

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The correct answer is: Application controls relate to the processing of individual transactions.

18
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Choose two correct answers

Prenumbered documents are intended to mitigate risks of:

Select one or more:

A.

Monies are not banked

B.

Prevent the duplicate recording of sales

C.

Prevent the failure of recording sales

 D.

Orders may be taken from customers who are not able to pay

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The correct answers are: Prevent the failure of recording sales, Prevent the duplicate recording of
sales

Question  19

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Which of the following is not a key control for sales and cash receipts?

Select one:

A.

adequate documents and records

 B.

adequate separation of duties

C.

active board of directors

D.

internal verification procedures

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The correct answer is: active board of directors

Question  20

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Which of the following questions would be best to include in an internal control questionnaire
concerning the completeness assertion for purchases?
 Select one:

A.

Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted
for?

B.

Are purchase requisitions prenumbered and independently matched with vendor invoices?

C.

Is an authorized purchase order required before the receiving department can accept a shipment
or the vouchers payable department can record a voucher?

D.

Is the unpaid voucher file periodically reconciled with inventory records by an employee who does
not have access to purchase requisitions?

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The correct answer is: Are purchase orders, receiving reports, and vouchers prenumbered and
periodically accounted for?

Question  21

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Which of the following departments is most likely responsible for pay rate changes and changes in
deductible amounts for employees?

Select one:

A.

treasurer

B.

controller

C.

human resources department

D.
 general accounting department

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The correct answer is: human resources department

Question  22

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

Select one:

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.

Control procedures reasonably ensure that collusion among employees cannot occur.

D.

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

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The correct answer is: Control procedures reasonably ensure that collusion among employees
cannot occur.

Question  23

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Which of the following may form part of the internal audit? Select which three options are correct

Select one or more:

 A.

examination of supporting documents

B.

testing of internal controls

C.

field surveys to familiarize the auditor with systems and known problems

D.

providing assurance to shareholders about the financial statements

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The correct answers are: testing of internal controls, examination of supporting documents, field
surveys to familiarize the auditor with systems and known problems

Question  24

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Which of the following is not an example of an applications control?

Select one:

A.

Back-up of data is made to a remote site for data security.

B.

There are reasonableness tests for the unit selling price of a sale.

C.

After processing, all sales transactions are reviewed by the sales department.

D.

There is a preprocessing authorization of the sales transactions.

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 The correct answer is: Back-up of data is made to a remote site for data security.

Question  25

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The internal control that requires that "checks are prenumbered and accounted for" satisfies the
objective of

Select one:

A.

posting and summarization.

B.

existence.

C.
 accuracy.

D.

completeness.

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The correct answer is: completeness.

Question  26

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For effective internal control purposes, the accounts payable department generally should

Select one:

A.

have the authority to sign the checks.

 B.

approve the purchase order.

C.

supervise the preparation of the receiving report.

D.

establish the agreement of the vendor's invoice with the receiving report and purchase order.

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The correct answer is: establish the agreement of the vendor's invoice with the receiving report
and purchase order.

Question  27

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 Which of the following is the most consequence of the internal control deficiency described in the
sales system?

Select one:

A.

Extra accounts staff have been allocated to produce the sales invoices

B.

The payroll department has set up new joiners to the company

C.

The company has experienced significant staff shortages within their internal audit

D.

The manager is unlikely to have the necessary experience to estimate non – current assets

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The correct answer is: Extra accounts staff have been allocated to produce the sales invoices

Question  28

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A weak internal control system allows a department supervisor to "clock in" for a fictitious
employee and then approve the employee's time card at the end of the pay period. This fraud
would be detected if other controls were in place, such as having an independent party

Select one:

A.

compare the date of the recorded check in the payroll journal with the date on the canceled
checks and time cards

B.

foot the payroll journal and trace postings to the general ledger

C.

recompute hours worked from time cards.

D.
 distribute paychecks.

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The correct answer is: distribute paychecks.

Question  29

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Which of the following is not an underlying principle related to risk assessment?

Select one:

A.

The organization should have clear objectives in order to be able to identify and assess the risks
relating to the objectives.

B.

The auditors should determine how the company's risks should be managed.
 C.

The organization should monitor changes that could impact internal controls.

D.

The organization should consider the potential for fraudulent behavior.

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The correct answer is: The auditors should determine how the company's risks should be
managed.

Question  30

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Which of the following is not a general control?

Select one:
 A.

There are adequate program run instructions for operating the computer.

B.

Computer performed validation tests of input accuracy.

C.

Equipment failure causes error messages on monitor.

D.

There is a separation of duties between programmer and operators.

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The correct answer is: Computer performed validation tests of input accuracy.

Question  31

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 Question text

The following describes processes in the payment system at Unicorn Ltd. For each process, select
whether it represents a strength or a deficiency of the system.

Set limits are placed on any cash advances that can be paid Answer
to subcontractor. 1
The responsibility for preparing and signing cheques is Answer
delegated to a dedicated cashier. 2
The company keeps all securities and title deeds in a safe,
to which only the cashier and the managing director hold Answer
keys. 3

Feedback

The correct answer is: Set limits are placed on any cash advances that can be paid to
subcontractor. → Deficiency, The responsibility for preparing and signing cheques is delegated to
a dedicated cashier. → Deficiency, The company keeps all securities and title deeds in a safe, to
which only the cashier and the managing director hold keys. → Deficiency

Question  32

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

Select one:
 A.

the frequency and effectiveness of the controls.

B.

the implementation and operating effectiveness of the controls.

C.

the design and operating effectiveness of the controls.

D.

the effectiveness and efficiency of the controls.

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The correct answer is: the design and operating effectiveness of the controls.

Question  33

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Which one of the following duties should not be assigned the purchases department?

Select one:

A.

designing the purchase order form

B.

finding the lowest cost vendor

C.

authorizing the acquisition of goods

D.

reviewing vendors' catalog descriptions and prices for standardized items

Feedback
 The correct answer is: authorizing the acquisition of goods

Question  34

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If a company has an effective internal audit department,

Select one:

A.

the internal auditors must be CPAs in order for the external auditors to rely on their work.

B.

their work cannot be used by the external auditors per auditing standards.

C.
 the internal auditors can express an opinion on the fairness of the financial statements.

D.

it can reduce external audit costs by providing direct assistance to the external auditors.

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The correct answer is: it can reduce external audit costs by providing direct assistance to the
external auditors.

Question  35

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To obtain an understanding of an entity's control environment, an auditor should concentrate on

the substance of management's policies and procedures rather than their form because

Select one:

A.

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

the policies and procedures may be so weak that no reliance is contemplated by the auditor.

C.

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

D.

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

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The correct answer is: management may establish appropriate policies and procedures but not act
on them.

Question  36

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 Question text

Which of the following would have the least amount of importance regarding controls over the
processing of payroll?

Select one:

A.

Distribution of pay checks should be performed by someone who is not involved in the other
payroll functions.

B.

The person authorized to sign paychecks should not be otherwise involved in the preparation of
the payroll.

C.

Unclaimed paychecks should be immediately returned for redeposit.

D.

A check-signing machine should not be used to replace a manual signature.

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The correct answer is: A check-signing machine should not be used to replace a manual signature.

37
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Fresh Flower Ltd operates a number of control procedures in its cash collection activities.

Assuming that all controls are operating effectively, which one of the following control procedures
is most likely to ensure that all monies received are recorded

Select one:

A.

Agreement of cash collections with banking and cash and sales records

B.

Bank reconciliations

C.
 Restrictions on issue of blank cheques

D.

Daily bankings

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The correct answer is: Agreement of cash collections with banking and cash and sales records

Question  38

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Which of the following control procedures should be implemented to limit fraud in purchases
system:

Select one:

A.

Management has delegated the authority to make purchases under a certain dollar limit to
subordinates.
 B.

An individual handling marketable securities is responsible for making the purchases, recording
the purchases, and reporting any discrepancies and gains/losses to senior management.

C.

The assignment of responsibility and accountability in the accounts receivable department is not
clear.

D.

An individual has held the same cash-handling job for an extended period without any rotation of
duties.

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The correct answer is: Management has delegated the authority to make purchases under a
certain dollar limit to subordinates.

Question  39

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Question text

When planning the audit of the purchases cycle, which of the following internal controls should
the auditor test in order to ensure that liabilities are not understated?

Select one:

A.

Invoices are matched with copy purchase orders and authorized before being recorded in the
purchases accounting book

B.

Periodic purchase ledger reconciliations are performed (and signed) by personnel independent of
the goods inwards department

C.

Goods inwards records (GRNs) are matched to invoices and regularly reviewed for items in respect
of which no invoice has been received. An authorised list of unmatched GRNs is produced at the
end of each month

D.

Invoices are authorized as matched with goods inwards/service received notes before being
recorded in the purchases day book

Feedback

The correct answer is: Goods inwards records (GRNs) are matched to invoices and regularly
reviewed for items in respect of which no invoice has been received. An authorised list of
unmatched GRNs is produced at the end of each month
Question  40

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Which of the following is not a key control in purchase systems?

Select one:

A.

authorization of payments

B.

timely recording and independent review of transactions

C.

authorization of purchases
 D.

authorization of credit

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The correct answer is: authorization of credit

Question  41

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The following describes the sales system in operation at Adventure Company. For each process
indicate whether the process indicates a strength or a deficiency of the system

Blank sales invoice are readily available from a tray in the Answer
accounting department 1
Unfulfilled production notes are placed in a pending file
which is reviewed weekly and completed as soon as Answer
possible 2

Feedback

The correct answer is: Blank sales invoice are readily available from a tray in the accounting
department → Deficiency, Unfulfilled production notes are placed in a pending file which is
reviewed weekly and completed as soon as possible → Strength
Question  42

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The scope and objectives of the internal audit function vary widely and depend on the size and
structure of the entity and the requirements of its management.

Which three of the following functions could internal audit perform and still operate effectively?

Select one or more:

A.

Advising management on cost effective controls for systems and activities routinely preparing
bank reconciliations

B.

Authorization of transactions in excess of limits set by management

C.
 Examination of financial and operational information for management

D.

Review of accounting systems and related controls

Feedback

The correct answers are: Examination of financial and operational information for management,
Review of accounting systems and related controls, Advising management on cost effective
controls for systems and activities routinely preparing bank reconciliations

Question  43

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Select whether each of the following statements is true or false. In the sales system, the following
duties should be segregated:

Answer 1
Invoicing and inventory despatch
Recording sales and preparing statements Answer 2

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 The correct answer is:

Invoicing and inventory despatch → True, Recording sales and preparing statements → True

Question  44

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It would be appropriate for the payroll department to be responsible for which of the following
functions?

Select one:

A.

temporary retention of unclaimed employee paychecks

B.

preparation of governmental reports as to employees' earnings and withholding taxes

 C.

maintain records of employment, firings, and raises

D.

approval of employee time records

Feedback

The correct answer is: preparation of governmental reports as to employees' earnings and
withholding taxes

Question  45

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The following describes the processes which make up the sales system in operation at Unicon and
Co.

For each process, select whether it represents a strength or a deficiency of the system.

The order automatically generates a message to the

distribution centre which despatches the goods and to the Answer
accounts department, which immediately raises an invoice 1
and sends it to the customer.
 Customer queries are dealt with by reception staff. Answer
2
Orders are placed by telephone. When a call is received,
the person receiving the order checks the customer's credit
status and that the customer's current balance is below the Answer
maximum level, checks that the item is in inventory, and 3
then immediately inputs the order into the system.

Feedback

The correct answer is: The order automatically generates a message to the distribution centre
which despatches the goods and to the accounts department, which immediately raises an invoice
and sends it to the customer. → Deficiency, Customer queries are dealt with by reception staff. →
Deficiency, Orders are placed by telephone. When a call is received, the person receiving the order
checks the customer's credit status and that the customer's current balance is below the maximum
level, checks that the item is in inventory, and then immediately inputs the order into the system.
→ Strength

Question  46

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Records that include data about employees such as employment date, performance ratings and
pay rates are the

Select one:

A.
 employee screening forms.

B.

human resource records.

C.

summary payroll reports.

D.

employee folders.

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The correct answer is: human resource records.

Question  47

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 Question text

The ________ has the responsibility for approving the number of hours worked for each employee.

Select one:

A.

employee's supervisor

B.

chief financial officer

C.

budgeting supervisor

D.

human resources department

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The correct answer is: employee's supervisor

48
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Fresh Flower Ltd operates a number of control procedures in its despatch and invoicing activities.

Assuming that all controls are operating effectively, which two of the following control procedures
is most likely to ensure that credit notes are only given for valid reasons?

Select one or more:

A.

Orders only accepted from customers who have no credit problems

B.

Correct prices quoted to customers

C.

Condition of return checked

 D.

Authorization of credit notes

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The correct answers are: Condition of return checked, Authorization of credit notes

Question  49

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The following describes the processes in the payroll system at Wembley Ltd.

For each process, select whether it represents a strength or a deficiency of the system.

Employees are given individual security codes to punch

into the main door key pad. This key pad also monitors the Answer
hours worked by employees, a sample of which are 1
checked against data from headcounts during the day.
Wages are paid by bank transfer, which is authorized by Answer
the financial controller. 2
The payroll is prepared by a payroll clerk from hours Answer
worked information on a standard payroll IT package. The 3
payroll is checked to individual records automatically by
the system. The payroll is approved by the financial
 controller.

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The correct answer is: Employees are given individual security codes to punch into the main door
key pad. This key pad also monitors the hours worked by employees, a sample of which are
checked against data from headcounts during the day. → Strength, Wages are paid by bank
transfer, which is authorized by the financial controller. → Strength, The payroll is prepared by a
payroll clerk from hours worked information on a standard payroll IT package. The payroll is
checked to individual records automatically by the system. The payroll is approved by the financial
controller. → Strength

Question  50

Complete

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Question text

When testing the controls for the completeness transaction-related audit objectives,

Select one:

A.

failure to record purchase transactions will generally understate net income.

B.
 it is generally easy for the auditor to determine whether unrecorded transactions exist.

C.

failure to record purchase transactions has no impact on the balance sheet.

D.

the audit time for accounts payable can be reduced if the client has effective internal controls and
the auditor properly tests those controls.

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The correct answer is: the audit time for accounts payable can be reduced if the client has effective
internal controls and the auditor properly tests those controls.

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