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3. Of the following statements about internal control, which of the following is false?

MULTIPLE CHOICE

A. No one person should be responsible for the custody and the recording of an asset.

B. Transactions must be properly authorized before such transactions are processed.

C. Audit procedures used to test internal controls include inquiries, inspection, observation and reperformance.

D. Controls reasonably ensure that collusion among employees cannot occur.

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

MULTIPLE CHOICE

A. Control environment

B. Monitoring

C. Control activities

D. Risk analysis

E. Generally accepted auditing standards (GAAS)

F. The accounting information system

5. Which of the following is not a limitation of internal control?

MULTIPLE CHOICE

A. Management review of the bank reconciliations.

B. Mistakes of judgement

C. Collusion between two employees

D. Misunderstanding of instructions.

8. The management letter is a:

MULTIPLE CHOICE

A. Letter from the auditor to management describing the audit fee computation.

B. Report to management from the auditor containing the auditor's recommendations for correcting deficiencies noted in internal control.

C. Report from management to the auditor containing the "management representations".

D. Report from management to the auditor that identifies the adjusting entires that were not recorded because of materiality.

10. Which of the following is not an advantage of generalized audit software packages?

MULTIPLE CHOICE

A. They are all written in one identical computer language.

B. They allow the auditor to conduct independent processing of live data

C. They can verify the reliability of a clients programs.

D. They allow the auditor to greatly expand the size of a sample of transactions to be tested.

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