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Internal Controls Multiple Choice

1. What is the auditor's responsibility for testing internal controls when the auditor believes that the internal controls are effective and intends to rely upon them?

The auditor is required to test the controls.
The auditor may test the controls.
The auditor does need not to test the controls.
The auditor never has any responsibility for testing internal controls.

2. Which one of the following is considered effective documentation of an internal control system?

Electronically pre-numbered records.
A cathode ray screen used in input.
Verbal authorization.
The financial statements.

3. Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then what is Pulley considered to have?

An immaterial indirect financial interest in McBurgers Corporation.
A material indirect financial interest in the McBurgers Corporation.
A loophole for claiming independence from McBurgers Corporation.
An direct financial interest in McBurgers Corporation.

Solution Preview

1. The auditor does need not to test the controls. Tests of controls aren't required based on the risk assessment standards of 2006 or for additional standards ending after December 15, 2012. An auditor can determine if adequate controls are in place based on other risk assessment procedures, analytical procedures and tests of the balances on the financial statements (The information was obtained at ...

Solution Summary

Internal controls for auditors responsibility are provided. The effective documentation of an internal control systems are considered.

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