ACC 403 Week 7 Quiz The auditors primary purpose in auditing the client’s system of internal control over financial reporting is: Which of the following components of the control environment define the existing lines of responsibility and authority? Which of the following is not one of the three primary objectives of effective internal control? Internal controls can never be regarded as completely effective. Even if company personnel could design an ideal system, its effectiveness depends on the: Reasonable assurance allows for: In performing the audit of internal control over financial reporting the auditor emphasizes internal control over class of transactions because: When one material weakness is present at the end of the year, management of a public company must conclude that internal control over financial reporting is: A five-step approach can be used to identify deficiencies, significant deficiencies, and material weaknesses. The first step in this approach is: Proper segregation of functional responsibilities calls for separation of: When considering internal controls, an important point to consider is that: Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements? To issue a report on internal control over financial reporting for a public company, an auditor must: The employee in charge of authorizing credit to the company’s customers does not fully understand the concept of credit risk. This lack of knowledge would constitute: An act of two or more employees to steal assets and cover their theft by misstating the accounting records would be referred to as: Which of the following deal with ongoing or periodic assessment of the quality of internal control by management? When assessing the risk for fraud, the auditor must be cognizant of the fact that: Companies may intentionally understate earnings when income is high to create ________ that may be used in future years to increase earnings. A company is concerned with the theft of cash after the sale has been recorded. One way in which fraudsters conceal the theft is by a process called “lapping.” Which of the following best describes lapping? Fraud awareness training should be: Fraud is more prevalent in smaller businesses and not-for-profit organizations because it is more difficult for them to maintain: Which of the following questions is the auditor not required to ask company management when assessing fraud risk? Financial statement manipulation risk is arguably present for all companies’ financial statements. However, the risk is elevated for companies that: When dealing with revenue frauds: Which of the following is a factor that relates to incentives to misappropriate assets? Which of the following parties is responsible for implementing internal controls to minimize the likelihood of fraud? In the fraud triangle, fraudulent financial reporting and misappropriation of assets: Misappropriation of assets is normally perpetrated by: Two of the most useful warning signals that can indicate that revenue fraud is occurring are: Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting? Which party has the primary responsibility to oversee an organization’s financial reporting and internal control process?