Question

Which of the following is false regarding tests of controls?

		Some nonpublic companies are unwilling to implement ideal internal control systems because of cost.
		A company's size has a significant effect on the nature of internal control and the specific controls that are implemented.
		Walk-throughs can be performed instead of tests of controls.
		Auditing standards require the auditor to obtain a sufficient understanding of internal control to assess control risk.

Which of the following is false regarding audit risk?

		Inherent risk is the risk that audit evidence for an audit objective will fail to detect misstatements exceeding performance materiality.
		Acceptable audit risk is a measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualfied opinion has been issued.
		Auditing standards require the auditor to assess the risk of material misstatements in the client's financial statements.
		The audit risk model helps auditors decide how much and what types of evidence to accumulate for each relevant audit objective.

Which of the following is false regarding auditing in an IT environment?

		Auditors commonly do parallel simulation testing using generalized audit software.
		In networks, application software and data files used to process transactions are on one computer that other computers link to.
		A public company’s use of desktop computers in the financial reporting process may affect the audit of internal control over financial reporting.
		Auditors in smaller companies often audit around the computer when general controls are less effective than in more complex IT environments.

Which of the following is false regarding application controls?

		Processing controls are not meant to prevent and detect errors while transaction data are processed.
		The most important output control is review of the data for reasonableness by someone knowledgeable about the output.
		Application controls may be done by computers or client personnel.
		Input controls are designed to ensure that the information entered into the computer is authorized, accurate, and complete.

Answer 1

1- false statement

Walk-throughs can be performed instead of tests of controls because walk throughts tests can not be considered test of control.

2- false statement

The audit risk model helps auditors decide how much and what types of evidence to accumulate for each relevant audit objective because audit risk = control risk*detection risk*inherent risk and it determine the total amount of risk.

3- false statement

In networks, application software and data files used to process transactions are on one computer that other computers link to because they have high level controls and data management contron ensures that the data is properly used.

4- false statement

Processing controls are not meant to prevent and detect errors while transaction data are processed because it controls the whole data so it detect the errors and prevent that.