4 and 5

The type of financial analysis that expresses balance sheet accounts as percentages of total assets is known as

• expenditure analysis

• net worth analysis

• horizontal analysis

• vertical analysis

Horizontal analysis refers to

• the trend of income from year to year of persons suspected of fraud

• changes of financial statement numbers and ratios across several years

• financial statement amounts expressed each year as a proportion of a base amount

• the change in a suspect's net worth from the beginning to the end of a period

Which of the following audit procedures most likely would provide an auditor with the most assurance about the effectiveness of the operation of an entity's internal control?

• confirmation with outside parties

• successful re-performance of the control activity

• inquiry of client personnel

• observation of client personnel

Which of the following is a definition of control risk?

• The risk that the auditor's assessment of internal controls will be at less than the maximum level.

• The risk that the auditor will not detect a material misstatement.

• The risk that a material misstatement will not be prevented or detected on a timely basis by the client's internal controls.

• The susceptibility of material misstatement assuming there are no related internal controls, policies, or procedures.

Management's responsibility would include

• ensuring proper monitoring of internal control activities

• assessing the effectiveness of a client's internal controls

• documentation of understanding of a client's internal controls

• communicating internal control deficiencies

When obtaining an understanding of an entity's internal control in a financial statement audit at a nonissuer, an auditor is not obligated to

• search for significant deficiencies in the operation of the internal control system

• document the understanding of the company's internal control system

• perform procedures to understand the design of the internal control system

• determine whether the control activities have been placed in operation

Management fraud generally refers to

• intentional distortions of financial statements

• unintentional mistakes

• violations of GAAS

• noncompliance

The COSO framework is utilized as a benchmark to assess the internal control effectiveness by whom?

• Auditors and Analysts

• Analysts and Creditors

• Management and Analysts

• Management and Auditors

External auditors are responsible

• for finding all intentional misstatements concealed by collusion

• for reporting immaterial frauds to a level of management at least one level above the people involved

• for authenticating documents

• for reporting all frauds to outside agencies or parties

Which of the following outcomes is a likely benefit of information technology used for internal control?

• enhanced timeliness of information

• processing of unusual or nonrecurring transactions

• potential loss of data

• recording of unauthorized transactions