Chaper 5: Assurance1

The process of preparing the financial statements

• Control environment
  

• Information system and communication
  

• Control activities
  

Locking the inventory storeroom

• Control environment
  

• Information system and communication
  

• Control activities
  

The company has an established and well-resourced internal audit function.

• Control risk is higher than normal
  

• Control risk is lower than normal
  

The company has a history of reviewing financial performance on a regular basis at board level.

• Control risk is higher than normal
  

• Control risk is lower than normal
  

Purchase invoices are not authorised before payment.

• Control risk is higher than normal
  

• Control risk is lower than normal
  

Which three of the following statements about audit committees are correct?

• At least 50% of the members of an audit committee must be non-executive directors
  

• Listed companies are required to have an audit committee
  

• Audit committees are considered to be good practice for all large companies
  

• If a company has an internal audit function, the chief internal auditor should sit on the audit
  committee
  

• Audit committees are an important aspect of a company’s control environment
  

According to ISA (UK) 315, Identifying and Assessing the Risks of Material Misstatement , which three4of the following are aspects of an entity’s control environment?

• The attitude of the directors to internal controls

• The attitude of staff to internal controls

• The awareness of internal control issues in the company

• The actions of senior management in relation to internal controls

Which one of the following is not part of an entity’s risk assessment process?

• Identify relevant business risks
  

• Estimate the impact of risks
  

• Assess the likelihood of occurrence
  

• Decide upon actions to manage the risks
  

• Report the process to the auditors
  

The information system comprises only the IT system of a company

• True

• False
  

The information system includes the process of preparing the financial statements, such as the production of journals.

• True

• False