Question

1. Which of the following is not an assurance to be provided by an effective internal control system?

1. Transactions are recorded to maintain accountability for assets.
2. Access to assets is limited to members of management.
3. Transactions are recorded to permit the preparation of reliable financial statements.
4. Management is responsible for knowledge and authorization of transactions.

2. Which of the following internal control is most likely relevant to an audit of financial statements?

1. A bank’s loan approval process.
2. A TV manufacturer’s computerized production scheduling system.
3. A furniture manufacturer’s controls for incidental sales of scrap materials that accounts for less than 1% of total sales.
4. An airline’s automated controls that maintain flight schedules.

3. Which of the following elements is most likely to be a component of a direct reporting assurance engagement?

1. Absolute assurance
2. Auditor independence
3. Low level of assurance
4. A written independence

Answer 1

1. C) Transactions are recorded to permit reliable financial statements is not related to effective internal control system.

Rest options are part of reliable internal control system

2. a) A bank's loan approval process internal control is related to audit of financial statements. as loan is related to financial statement item.

all other internal control mentioned in other options not related to financial statement item.

3. a) Absolute assurance is most likely to be component of direct reporting assurance engagement

other options are not most likely related to direct reporting assurance engagemenr