32.

Internal controls are not designed to provide reasonable

assurance that All frauds will be detected. 
Transactions are executed in accordance with management’s
authorization. Access to assets is permitted only in accordance with
management’s authorization. Company personnel comply with applicable
rules and regulations. 
33.Which of the following statements is correct with respect to separation of duties?
Employees should not have temporary and permanent custody of assets. It is
desirable to prevent employees who authorize transactions from having custody
of  related assets. 
It is permissible to allow an employee to open cash receipts and record those
receipts. None of the above is correct. 
34.Which of the following would contribute most to the safeguarding of assets?
Access to computer facilities and records is limited to authorized personnel.
Training programs are conducted to develop competence of newly hired
personnel. Control and subsidiary accounts are reconciled on a regularly
scheduled basis. Blank stock of all purchase orders and sales invoices are
prenumbered. 
35.The single most effective procedures established to avoid allowing any person to
be in a  position to perpetrate and then conceal errors or fraud is 
Establish an internal audit department. 
Require each employee to take a vacation each year. 
The separation of the functional responsibilities, custodianship, record
keeping,  operations and authorization. 
Require the bonding of personnel in positions that necessitate handling of cash
and other  universally desirable valuables. 
36.Which of the following deal with ongoing or periodic assessment of the quality of
internal  control by management? 
Quality control activities 
Monitoring activities 
Oversight activities 
Management activities 
37.Which of the following activities would be least likely to strengthen a company’s
internal  control? 
Separating accounting from other financial operations. 
Maintaining insurance for fire and theft. 
Fixing responsibility for the performance of employee duties. 
Carefully selecting and training employees. 
38.An auditor assess control risk because it 
Is relevant to the auditor’s understanding of the control environment. 
Provides assurance that the auditor’s materiality levels are
appropriate. Indicates to the auditor where inherent risk may
be the greatest. 
Affects the level of detection risk that the auditor may accept. 
39.The auditor most likely assess control risk at a high level when 
It would be efficient to perform test of control. 
 The entity’s accounting and internal control systems are not reliable.
The auditor wishes to rely on the entity’s accounting and internal control
systems. The auditor wants to restrict substantive tests. 
40.Control testing is performed in order to determine whether or not 
The assessed level of control risk can be reduced 
Necessary controls are absent. 
Incompatible functions exist. 
Material peso errors exist. 
41.Tests of controls are directed toward the control’s  
Efficiency 
Effectiveness 
Efficiency and effectiveness. 
Cost benefit ratio. 
42.Which of the following audit tests would be regarded as a test of
controls? Comparison of the inventory pricing to vendor’s invoices. 
Tests of the signatures on canceled checks to board of director’s
authorization. Tests of the additions to property, plant and equipment by
physical inspection. Review of the specific items making up the balance in a
given general ledger account. 
43.Before assessing control risk at a level lower than the maximum, the auditor
obtains  reasonable assurance that controls are use and operating effectively. This
assurance is  most likely obtained in part by 
Preparing flowcharts. 
Performing substantive tests. 
Inspection of documents. 
Analyzing tests of threads and ratios. 
44.During the consideration of internal control in a financial statement audit, an auditor
is not  obliged to  
Search for a significant deficiencies in the operation of the
internal control. Understand the internal control and the
information system. 
Determine whether the control activities relevant to the audit planning
have been implemented. 
Perform procedures to understand the design of internal control. 
45.The management letter is used 
To allow management to corroborate oral representations to
the auditor. To confirm the terms of the audit engagement. 
To document the auditor’s consideration of internal controls. 
To make recommendations to the client based on observations made during
the audit