Which of the following best describes an entitys accounting information and communication system?

D) Assurance of elimination of business risk

B) Reliability of financial reporting

B) consist of policies and procedures designed to provide reasonable assurance that the company achieves its objectives and goals.

A) all frauds will be detected.

C) inherent limitations and reasonable assurance.

A) A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

B) to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements.

C) if the weakness exists at the end of the year.

A) the accuracy of accounting system outputs depends heavily on the accuracy of inputs and processing.

D) competency and dependability of the people using it.

B) auditors are concerned with the client's internal controls over the safeguarding of assets if they affect the financial statements.

D) Control procedures reasonably ensure that collusion among employees cannot occur.

A) all public companies to issue reports on internal controls.

A) controls affecting the reliability of financial reporting are inadequate.

A) classes of transactions.

C) the design and operating effectiveness of the controls.

A) low likelihood that material misstatements will not be prevented or detected by internal controls.

A) The audits of internal control and the financial statements provide reasonable assurance as to misstatements.

C) evaluate management's assessment process and independently assess the design and operating effectiveness of internal control.

B) Maintaining insurance for fire and theft

A) Organizational structure

B) Employees who authorize transactions should not have custody of related assets.

B) A sales manager's authorization for a sales return

D) Documents should be prenumbered consecutively to facilitate control over missing documents.

C) The policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives

B) transactions are executed in accordance with management's authorization.

C) Adequate separation of duties

B) achievement of the objectives of internal control.

B) authorization, recording, and custody.

C) it can reduce external audit costs by providing direct assistance to the external auditors.

D) place limited reliance on the work performed by the internal audit staff.

A) management may establish appropriate policies and procedures but not act on them.

1. Adequate separation of duties 2. Proper authorization of transactions and activities 3. Adequate documents and records 4. Physical control over assets and records

5. Independent checks on performance

• failure to meet prior objectives, • quality of personnel, • geographic dispersion of company operations, • significance and complexity of core business processes, • introduction of new information technologies • entrance of new competitors and,

• economic downturns

1. Separation of custody of the assets from accounting 2. Separation of the authorization of transactions from custody of related assets 3. Separation of operational responsibility from record keeping responsibility

4. Separation of IT duties from user departments

1. The control environment: actions, policies, overall attitudes of management 2. Risk Assessment: mgmt's ID and analysis of risks relevant to financial stmt prep. 3. Information and Communication: The methods used to initiate, record, process, and report the entity's transactions 4. Control Activities: the policies and procedures mgmt has set to meet internal control objectives

5. Monitoring: mgmt's ongoing periodic assessment of the quality if IC performance.

: The control environment consists of the actions, policies, and procedures that reflect the overall attitudes of top management, directors, and owners of an entity about control and its importance to the entity. Subcomponents include: • integrity and ethical values • commitment to competence • board of director or audit committee participation • management's philosophy and operating style • organizational structure

• human resource policies and practices.

• identify the factors affecting risk • assess the significance of risks and likelihood of occurrence

• determine actions necessary to manage the risks.

• assertions about classes of transactions and other events • assertions about account balances

• assertions about presentation and disclosure.

C) performing a walk-through.

A) design, perform and evaluate tests of controls.

B) documenting the auditor's understanding of internal controls.

B) questionnaires offer useful checklists to remind the auditor of the many different types of internal controls that should exist.

C) observation of employees applying control activities.

B) The company's CFO was indicted for embezzling from the company.

A) a deficiency in operation of internal controls.

A) that the integrity of management and the adequacy of accounting records are the two primary factors determining auditability.

A) make a preliminary assessment for each transaction-related audit objective for each major type of transaction.

A) A control deficiency exists if the design or operation of controls does not permit company personnel to prevent or detect misstatements on a timely basis.

B) both significant deficiencies and material weaknesses in internal control to those charged with governance.

C) Audit committee of the company's board of directors and to management

B) internal control deficiencies that could adversely affect a company's ability to initiate, record, process, or report external financial statements reliably.

C) Written communication is required.

C) determine potential misstatements that could result.

C) many auditors use a control risk matrix to assist in the control risk assessment process.

A) is no longer a concern because there is no longer a significant deficiency or material weakness.

D) Inspect design documents

C) The auditor uses control risk assessment and results of tests of controls to determine planned detection risk and the related substantive tests for the financial statement audit.

• Make inquiries of appropriate client personnel • Examine documents, records, and reports • Observe control-related activities

• Reperform client procedures

D) a scope limitation requires the auditor to express a qualified opinion or a disclaimer of opinion on internal controls.

D) the owner-manager's direct involvement in the control process.

B) An audit of internal control is not required.