Reference no: EM132826482

TRUE OR FALSE: Write the word TRUE for each correct statement; otherwise, write FALSE.

Question 1: If, when obtaining an understanding of control activities of a relatively small client, the auditor identified no control activities, the auditor would probably set a high assessment of control risk.

Question 2: When internal controls are effective, then substantive audit tests are more reliable; thus, the extent of substantive tests should be reduced.

Question 3: When a company designs and implements internal controls, cost of the controls is not a valid consideration.

Question 4: For proper internal control, there should be adequate separation of duties. However, the extent of separation of duties considered "adequate" depends heavily on the size of the organization.

Question 5: When internal controls over a given financial statement account are assessed as highly effective, the auditor need not obtain audit evidence for that account beyond testing the controls.

Question 6: Procedures used to obtain an understanding of internal control are normally performed on fewer transactions than procedures used to test controls.

Question 7: There is a direct relationship between an entity's objectives and the controls it implements to provide reasonable assurance about their achievement.

Question 8: Internal control that is relevant in the audit pertains to reliability of financial information.

Question 9: In a financial statement audit, CPAs are required to assess the operating effectiveness of most significant accounting-oriented controls.

Question 10: Well-designed internal control will prevent all fraud by top management.