Question 1

Verifying the accuracy of certain information,often through communication with third parties,is known as

Accepted Answer

Verifying information through communication with third parties is called confirmation. Reperformance refers to repeating procedures performed by the client, substantiation refers to providing evidence for amounts and disclosures, and documentation refers to maintaining proper record-keeping.

Question 2

Assessing the quality of internal controls,the reliability of information,and operating performance are all part of which stage of the auditing process?

Accepted Answer

Assessing the quality of internal controls, the reliability of information, and operating performance are all part of the evaluation of audit evidence stage. This is the stage where the auditor analyzes the evidence collected in the previous stage (collection of audit evidence) to determine whether the financial statements are fairly presented in accordance with accounting standards. The other stages of the auditing process are audit planning, where the auditor plans the audit and identifies the areas that require audit focus, and communication of audit results, where the auditor communicates the results of the audit to the client and other stakeholders.

Question 3

The purpose of ________ is to determine why,how,when,and who will perform the audit.

Accepted Answer

Audit planning is the process of developing a plan for the audit engagement, including determining the scope of the audit, identifying risks, and determining the audit objectives and approach. It also involves determining who will perform the audit, when the audit will take place, and how the audit will be conducted. The other choices (B, C, and D) refer to other parts of the audit process.

Question 4

Control risk is defined as the

Accepted Answer

Control risk is the risk that a material misstatement will not be prevented or detected by the internal control structure.

Question 5

Which type of work listed below is not typical of internal auditors?

Accepted Answer

Financial statement audits are typically conducted by external auditors, not internal auditors. The other types of audits listed are more typical of internal auditors.

Question 6

The evidence collection method that considers the relationships and trends among information to detect items that should be investigated further is called

Accepted Answer

The evidence collection method that considers relationships and trends among information to detect items that should be investigated further is analytical review. This involves reviewing data and identifying patterns or deviations that could indicate errors or fraud. It is a useful tool in the detection phase of an audit or investigation. Options A, B, and C are other evidence collection methods, but they do not involve analyzing data in the same way as analytical review.

Question 7

Auditing involves the

Accepted Answer

Auditing involves the collection, review, and documentation of audit evidence. Planning and verification of economic events may be part of the auditing process, but it is not the definition of auditing. Collection of audit evidence and approval of economic events are not accurate descriptions of auditing. Testing, documentation, and certification of audit evidence may be part of the auditing process, but it is not a comprehensive definition of auditing.

Question 8

One type of audit that is concerned with the economical and efficient use of resources and the accomplishment of established goals and objectives is known as a(n)________ audit.

Accepted Answer

Operational or management audit is concerned with evaluating the efficiency and effectiveness of operations, including the use of resources, and the achievement of predetermined goals and objectives. This type of audit focuses on assessing the processes and procedures used by management to achieve organizational objectives. Financial audits focus on the financial statements, information systems audits focus on the technology systems, and internal control audits focus on the controls in place to manage risks.

Question 9

A system that employs various types of advanced technology has more ________ risk than traditional batch processing.

Accepted Answer

Advanced technology systems have more complex processes and interfaces, which leads to higher inherent risk. Control and detection measures are often put in place to mitigate this risk, but they do not eliminate it entirely. Investing is not a relevant factor in this context.

Question 10

With which stage in the auditing process are the consideration of risk factors and materiality most associated?

Accepted Answer

Risk factors and materiality are most associated with the audit planning stage, where the auditor identifies areas of higher risk and determines the extent of audit procedures needed to address those risks. Materiality is also used to set the threshold for determining the significance of misstatements in the financial statements.

Question 11

What is not a typical responsibility of an internal auditor?

Accepted Answer

The preparation of the company's financial statements is the responsibility of the external auditor or the company's accounting department. Internal auditors are responsible for evaluating and monitoring the effectiveness of the company's internal controls and risk management systems, helping management to improve organizational effectiveness, and assisting in the design and implementation of an AIS.

Question 12

Organizing the audit team and the physical examination of assets are components of which two separate audit stages?

Accepted Answer

Organizing the audit team and the physical examination of assets are both part of the planning stage of the audit, which is focused on collecting audit evidence. Therefore, the correct answer is B - planning, collecting audit evidence.

Question 13

An auditor must be willing to accept some degree of risk that the audit conclusion is incorrect.Accordingly,the auditor's objective is to seek ________ that no material error exists in the information audited.

Accepted Answer

The auditor's objective is to seek reasonable assurance that no material error exists in the information audited. It is not possible to achieve absolute reliability, and there is always some degree of risk that the audit conclusion may be incorrect. Reasonable evidence and reasonable objectivity are also important for a successful audit, but they are not the primary objective.

Question 14

The ________ audit is concerned with the economical and efficient use of resources and the accomplishment of established goals and objectives.

Accepted Answer

The operational audit specifically looks at the efficiency and effectiveness of resources in achieving established goals and objectives. Financial audits focus on financial statements, informational audits focus on information accuracy and integrity, and information systems audits focus on the reliability and security of computer systems.

Question 15

The evidence collection method that examines all supporting documents to determine the validity of a transaction is called

Accepted Answer

Vouching involves examining supporting documents to verify the accuracy and authenticity of transactions recorded in the books of accounts. It is a method used in auditing to ensure that transactions are valid, authorized, and recorded correctly.

Question 16

The ________ audit reviews the general and application controls of an AIS to assess its compliance with internal control policies and procedures and its effectiveness in safeguarding assets.

Accepted Answer

The given scenario describes an audit of the controls of an AIS, which falls under the domain of Information Systems (IS) audit. Option A, financial audit, is a much broader type of audit that covers all aspects of financial reporting and compliance. Option C, management audit, is an internal review of management practices, governance, and policies. Option D, internal control audit, is a more specific type of audit that focuses on evaluating the design and effectiveness of internal control systems across an organization. While all of these audit types are relevant to assessing the effectiveness of internal controls, the specific context of the question suggests that an IS audit is the best choice.

Question 17

The possibility that a material error will occur even though auditors are following audit procedures and using good judgment is referred to as

Accepted Answer

The possibility that a material error will not be detected by auditors even though they are following proper audit procedures and using sound judgment is referred to as detection risk. Inherent risk refers to the risk that exists within an organization's environment or processes that could result in a material misstatement. Control risk pertains to the risk that internal controls cannot prevent or detect a material misstatement. Investigating risk is not a commonly used term in auditing.

Question 18

The ________ audit examines the reliability and integrity of accounting records.

Accepted Answer

A financial audit focuses on examining and verifying the reliability and integrity of financial statements and accounting records. Informational audits may focus on various types of data, but do not necessarily pertain specifically to accounting records. Information systems audits evaluate the security and effectiveness of an organization's technology and data management systems. Operational audits assess the efficiency and effectiveness of an organization's operational processes.

Question 19

The ________ stage of the auditing process involves (among other things)the auditors observing the operating activities and having discussions with employees.

Accepted Answer

The collection of audit evidence stage involves the auditors gathering and evaluating evidence to support their audit opinion. This includes observing operating activities and having discussions with employees to gather information about the company's operations and internal controls. The audit planning stage involves developing an overall audit strategy, while the evaluation of audit evidence stage involves determining the sufficiency and appropriateness of the evidence gathered. The communication of audit results stage involves reporting the findings to management, the audit committee, and other stakeholders.

Question 20

The risk-based audit approach is

Accepted Answer

The risk-based audit approach is a four-step approach to internal control evaluation.

Quiz 11: Auditing Computer-Based Information Systems