Auditing and Assurance Training Internal Controls and Risk Assessment

Question 1

Which framework is most widely used in the US for evaluating the effectiveness of internal controls?

Accepted Answer

COSO

Answer

COBIT

Answer

ISO 31000

Answer

PCAOB AS 2201

Question 2

What is the primary purpose of a risk assessment in an audit engagement?

Accepted Answer

To identify and evaluate risks of material misstatement

Answer

To calculate materiality thresholds

Answer

To determine audit fees

Answer

To select the audit team members

Question 3

Inherent risk is best described as the susceptibility of an assertion to material misstatement assuming:

Accepted Answer

No related internal controls exist

Answer

Strong internal controls are in place

Answer

Management has reviewed all transactions

Answer

The auditor has tested all balances

Question 4

Which component of the COSO framework addresses how an organization communicates information relevant to internal control objectives?

Accepted Answer

Information and Communication

Answer

Control Environment

Answer

Risk Assessment

Answer

Monitoring Activities

Question 5

A control that prevents an error from occurring is classified as a:

Accepted Answer

Preventive control

Answer

Detective control

Answer

Corrective control

Answer

Compensating control

Question 6

What does the term 'control deficiency' mean in US auditing standards?

Accepted Answer

A shortcoming in the design or operation of a control that fails to prevent or detect misstatements

Answer

A complete absence of internal controls

Answer

An error discovered during substantive testing

Answer

A disagreement between management and the auditor