Risk and Procedures for Control Paper 3

1

When management of the sales department has the opportunity to override the system of internal controls of the accounting department, a weakness exists in






2

Risk assessment is a process






3

Some account balances, such as those for pensions or leases, are the results of complex calculations. The susceptibility to material misstatements in these types of accounts is defined as






4

Which of the following is not a component of internal control?






5

A restaurant food chain has over 680 restaurants. All food orders for each restaurant are required to be input into an electronic device which records all food orders by food servers and transmits the order to the kitchen for preparation. All food servers are responsible for collecting cash for all their orders and must turn in cash at the end of their shift equal to the sales value of food ordered for their I.D. number. The manager then reconciles the cash received for the day with the computerized record of food orders generated. All differences are investigated immediately by the restaurant. Corporate headquarters has established monitoring controls to determine when an individual restaurant might not be recording all its revenue and transmitting the applicable cash to the corporate headquarters. Which one of the following would be the best example of a monitoring control?






6

Audit risk consists of inherent risk, control risk, and detection risk. Which of the following statements is true?






7

Audit risk is a combination of three separate risks at the account-balance or class-of-transactions level. The first risk is inherent risk. The second risk is that material misstatements will not be prevented or detected by internal control. The third risk is that






8

Audit risk is a combination of three separate risks at the account-balance or class-oftransactions level. The first risk is inherent risk. The second risk is that material misstatements will not be prevented or detected by internal control. The third risk is that






9

There are three components of audit risk: inherent risk, control risk, and detection risk. Inherent risk is






10

The basic concepts implicit in internal accounting controls include the following:
? The cost of the system should not exceed benefits expected to be attained.
? The overall impact of the control procedure should not hinder operating efficiency.
Which one of the following internal accounting controls recognizes these two factors?






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