Auditing and Internal Controls Flashcards
6 cards from real Accounting Online Program practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Auditing and Internal Controls flashcards as text
What is the meaning of an 'unqualified' (clean) audit opinion?
Answer: The financial statements are fairly presented in all material respects
An unqualified (or unmodified) opinion means the auditors found the financial statements to be presented fairly in accordance with the applicable financial reporting framework.
Which of the following is an example of a preventive internal control?
Answer: Password requirements on accounting software
Preventive controls, like password requirements, are designed to deter or prevent errors and irregularities before they occur, unlike detective controls that identify them after the fact.
Materiality in auditing is best defined as:
Answer: The threshold at which a misstatement could influence the economic decisions of users
Materiality is the magnitude of a misstatement or omission that, individually or in aggregate, could reasonably be expected to influence the decisions of financial statement users.
What is a 'walkthrough' in the context of auditing internal controls?
Answer: Tracing a single transaction from initiation through recording to confirm controls operate as described
A walkthrough involves following a single transaction through every step of the accounting system to verify that described controls are actually in place and functioning.
Which type of audit focuses on the efficiency and effectiveness of an organization's operations?
Answer: Operational (performance) audit
An operational audit evaluates whether an organization's operations are being conducted efficiently and effectively in achieving management's objectives.
The COSO framework identifies how many components of internal control?
Answer: 5
The COSO Internal Control — Integrated Framework identifies five components: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring.