 Show Chapter 10 Multiple-Choice Questions 1.Which of the following is responsible for establishing a private company’s internal control? easya.Management. ab.Auditors. c.Management and auditors. d.Committee of Sponsoring Organizations. 2.Which of the following is not one of the three primary objectives of effective internal control? easya.Reliability of financial reporting db.Efficiency and effectiveness of operations c.Compliance with laws and regulations d.Assurance of elimination of business risk. 3. (Public)The Public Company Accounting Oversight Board states that reasonable assurance allows a: easya.small likelihood of ineffective internal controls. bb.remote likelihood that material misstatements will not be prevented or detected by internal control. c.likelihood that material misstatements will not be prevented or detected by internal control. d.high likelihood that material misstatements will not be prevented or detected by internal control. 4. easy Two key concepts that underlie management’s design and implementation of internal control are: ca.costs and materiality. b.absolute assurance and costs. c.inherent limitations and reasonable assurance. d.collusion and materiality. 5.Internal controls can never be considered as absolutely effective because: easya.their effectiveness is limited by the competency and dependability of employees. ab.not all organizations have internal audit departments. c.controls are designed to prevent and detect only material misstatements. d. internal controls prevent separation of duties. 6.A major control available in a small company, which might not be feasible in a big company, is: easya.a wider segregation of duties. db.a voucher system. c.fewer transactions to process. d.the owner-manager’s personal interest and close relationship with personnel. 7. (Public)Which of the following is responsible for establishing internal controls for a public company? easya.Management. ab.The PCAOB. c.Management and auditors. d.Committee of Sponsoring Organizations. 8. medium Which of the following parties provides an assessment of the effectiveness of internal control over financial reporting for public companies? a ManagementFinancial statement auditors Arens/Elder/Beasley What constitutes a material weakness and indications of the weakness?A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.
Which of the following is most likely to be considered a material weakness in internal control?Which of the following is most likely to be considered a material weakness in internal control? Ineffective oversight of financial reporting by the audit committee.
What is a weakness in auditing?A material weakness, when reported by an auditor, simply suggests that a misstatement could occur. If a material weakness remains undetected and unresolved, a material misstatement could eventually occur in a company's financial statements.
What is an identified weakness in a controlled system?A control weakness is a failure in the implementation or effectiveness of internal controls. Malicious actors can leverage internal control weakness to circumvent even the most robust security measures.
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Which of the following would probably not be considered an indication of a material weakness?
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