Risk and Procedures for Control Paper 8

1

An internal auditor noted that several shipments were not billed. To prevent recurrence of such nonbilling, the organization should






2

Controls can be classified according to function they are intended to perform; for example, to discover the occurrence of an unwanted event (detective), to avoid the occurrence of an unwanted event (preventive), or to ensure the occurrence of a desirable event (directive). Which of the following is a directive control?






3

An audit of the payroll function revealed several instances in which a payroll clerk had added fictitious employees to the payroll and deposited the checks in accounts of close relatives. What control should have prevented such actions?






4

An audit of the receiving function at the company’s distribution center revealed inadequate control over receipts. Which of the following controls would be appropriate for the receiving function?






5

The director of internal auditing at a large multinational firm is evaluating the draft of a new travel policy that requires preparation of a travel planning form for all travel. The travel planning form must be approved by the employee’s supervisor and the regional vice president. The director of internal auditing should






6

Which one of the following situations represents an internal control weakness in accounts receivable?






7

Control risk is the risk that a material misstatement in an account will not be prevented or detected on a timely basis by the client’s internal control structure policies or procedures. The best control procedure to prevent or detect fictitious payroll transactions is






8

One characteristic of an effective internal control structure is the proper segregation of duties. The combination of responsibilities that would not be considered a violation of segregation of functional responsibilities is






9

According to SAS 55 (AU 319), Consideration of Internal Control in a Financial Statement Audit, an entity’s internal control structure (ICS) consists of the policies and procedures established to provide reasonable assurance that specific entity objectives will be achieved. Only some of these objectives, policies, and procedures are relevant to a financial statement audit. Which one of the following would most likely be considered in such an audit?






10

Auditors regularly evaluate controls. Which of the following best describes the concept of control as recognized by internal auditors?






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