Internal Control MCQs

NOTE: Attempt all Questions to see the Result at the bottom of this page.

  1. 11)

    Which of the following is not an example of a circumstance, in which additional tests of control will not be performed after obtaining an understanding to plan the audit?

    • A) Controls are known to be cost ineffective
    • B) Controls are effective but auditor opines that performing tests of control and reduced substantive tests would not be cost effective
    • C) Controls are effective and evidence already obtained is adequate to support a planned assessed level of control risk which is less than high

    • D) Performing extensive substantive testing would not lead to efficiency

  2. 12)

    An auditor assesses control risk because it

    • A) affects the audit risk
    • B) affects the level of detection risk that auditor may accept
    • C) helps him to fix materiality level for each financial assertion
    • D) is directly related to inherent risk

  3. 13)

    A flow chart, made by the auditor, of an entity’s internal control system is a graphic representation that depicts the auditor’s.

    • A) understanding of the system
    • B) understanding of fraud risk factors
    • C) documentation of assessment of control risk
    • D) Both (a) and (c)

  4. 14)

    The performance of tests of control is documented in

    • A) audit programme
    • B) flow charts
    • C) working papers
    • D) any of the above

  5. 15)

    Which of the following statements is not correct?

    • A) Intern risk and control risk cannot be controlled by the management i.e are uncontrollable
    • B) Detection risk is related directly to they effectiveness of the auditor prosecutor
    • C) Detection risk related inversely to control risk
    • D) Internet risk and control risk are highly interrelated

  6. 16)

    The independence of an internal auditor will most likely be assured if he reports to the

    • A) President Finance
    • B) President System
    • C) Managing Director
    • D) CEO

  7. 17)

    In comparison to the independent auditor, an internal auditor is more likely to be concerned with

    • A) cost accounting system
    • B) internal control system
    • C) legal compliance
    • D) accounting system

  8. 18)

    When an independent auditor decides that the work performed by internal auditors may have bearing on the nature, timing and extent of planned audit procedures, the independent auditor should evaluate objectivity of the internal auditor. The most important factor influencing it would be

    • A) organizational level to which he reports
    • B) qualification of internal auditor
    • C) system of quality control of his work
    • D) all of the above

  9. 19)

    When an independent auditor relies on the work of an internal auditor, he or she should

    • A) examine the scope of internal auditor’s work
    • B) examine the system of supervising review and documentation of internal auditor’s work
    • C) adequacy of related audit programme
    • D) all of the above

  10. 20)

    Proper segregation of duties reduces the opportunities in which a person would both

    • A) establish controls and executes them
    • B) establish controls and executes them
    • C) perpetuate errors and frauds and conceals them
    • D) record the transaction in journal and ledger