Internal Controls & Auditing Flashcards
7 cards from real CFS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Internal Controls & Auditing flashcards as text
Which type of audit opinion is issued when financial statements are free of material misstatement but the auditor has a scope limitation?
Answer: Qualified opinion
A qualified opinion is issued when the financial statements are fairly presented except for a specific matter, including certain scope limitations.
The three-lines-of-defense model assigns which responsibility to internal audit?
Answer: Third line: independent assurance
Internal audit is the third line of defense, providing independent assurance over the effectiveness of governance, risk management, and internal controls.
When performing a walkthrough, an auditor is primarily trying to:
Answer: Confirm that controls are described accurately in documentation
A walkthrough traces a transaction from initiation through recording to verify that the process works as documented, confirming the accuracy of control descriptions.
A key risk indicator (KRI) for accounts payable fraud would most likely be:
Answer: Increasing number of new vendors with P.O. box addresses only
Vendors with only P.O. box addresses and no physical location are a red flag for fictitious vendor schemes in accounts payable.
Management override of internal controls is considered particularly dangerous because:
Answer: Controls cannot detect or prevent actions by those who designed them
Controls are typically designed by management, so management has the authority and knowledge to circumvent them, making management override a significant inherent limitation.
Which sampling method gives every transaction in a population an equal chance of being selected?
Answer: Simple random sampling
Simple random sampling ensures each item in the population has an equal and independent probability of selection, eliminating bias.
Under SOX Section 404, management is required to:
Answer: Assess and report on the effectiveness of internal controls over financial reporting
SOX Section 404 requires management to evaluate and report on the effectiveness of internal controls over financial reporting, with the external auditor attesting to that assessment.