Auditing & Internal Controls Flashcards
7 cards from real CIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing & Internal Controls flashcards as text
An auditor uses data analytics to compare employee bank account numbers to vendor bank account numbers. What risk is this procedure primarily designed to detect?
Answer: Fictitious vendor or conflict-of-interest schemes
Matching employee and vendor bank details can reveal shell vendors set up by employees to divert payments.
Which sampling method gives larger dollar balances a higher chance of selection?
Answer: Monetary unit sampling
Monetary unit (probability-proportional-to-size) sampling treats each dollar as a sampling unit, so larger balances are more likely to be selected.
A control deficiency serious enough that a material misstatement might not be prevented or detected on a timely basis is called:
Answer: A material weakness
A material weakness is a deficiency, or combination of deficiencies, where there is a reasonable possibility that a material misstatement will not be prevented or detected on time.
Which evidence would generally be considered the least reliable?
Answer: An oral representation from the employee who performs the process
Oral statements from internal staff are the least reliable because they are not documented or independently verified.
In a sales cycle, which control best prevents shipping goods to customers with poor credit?
Answer: Credit approval by the credit department before shipment
Independent credit approval before shipment prevents sales to customers who are unlikely to pay.
Which of the following best illustrates management override of controls?
Answer: A CFO directing staff to record unsupported top-side journal entries at quarter end
Management override happens when someone in authority bypasses established controls, such as forcing unsupported journal entries.
Continuous auditing differs from traditional periodic auditing mainly because it:
Answer: Uses technology to assess controls and transactions automatically and frequently
Continuous auditing uses automated tools to test transactions and controls in near real time instead of at set intervals.