ACCY 501 TEST 1 QUESTIONS WITH
CORRECT ANSWERS
What is external auditors independence called? - Answer- independent outside auditors;
conform to strict rules
How is internal auditor independence established? - Answer- by who they report to
within the organization
Audits internal auditors may perform - Answer- evaluate risks and controls
financial- helping external auditors
operational
compliance
What is the difference between the criteria of internal and external auditors? - Answer-
internal have a broader criteria while external have a uniform criteria
Can an internal auditor be external to an organization - Answer- yes
Two main external audit standards that address internal audit for non issuers - Answer-
1. AU-C 315- Understanding the Entity
2. AU-C 610 Using the Work of Internal Auditors
Two main external audit standards that address internal audit for issuers - Answer- 1.
AS 2605- Consideration of IAF
2. AS 2110- Identifying and Assessing Risks of MM
What is governance - Answer- the act or process of governing or overseeing the control
and direction of something
Internal audit does what? - Answer- evaluates and improves risk management, control,
and governance
Things internal audit does vs does not do - Answer- internal audit evaluates and
improves processes but does not guide or lead them
Governance - Answer- process conducted by the board of directors to authorize, direct,
and oversee mgmt toward the achievement of the organization's objectives
, Risk management - Answer- process conducted by management to understand and
deal with uncertainties that could affect the ability of the organization to achieve its
objectives
control - Answer- process conducted by mgmt to mitigate risks to an acceptable level
accounting - Answer- collection, classification, summarization, and communication of
financial data as they affect and represent a given entity
auditing - Answer- review the measurements and communications of accounting for
propreity; analytical but not constructive
financial accounting intended audience - Answer- non-insiders
managerial accounting intended audience - Answer- insiders- managers
tax intended audience - Answer- government
audit intended audience - Answer- gov, non insiders, insiders
3 phases of internal audit - Answer- planning
performing and evaluating
communicating outcomes
planning phase of internal audit - Answer- obtain an understanding of the auditee or
customer
set objectives
determine required evidence
decide nature, extent and timing of audit tests
performing and evaluating - Answer- application of specific audit procedures
document procedures and results
evaluate the evidence to reach conclusions and give practical advice
communicating outcomes - Answer- accurate, objective, clear, concise, constructive,
complete, and timely
what circumstances do we use internal auditing? - Answer- specific concern or non
specifc
why are internal audits performed? - Answer- primarily for the benefit of management
and the Board of Directors
why do we have internal auditing? - Answer- because of the principal agent model
principal- individual who employs agents to achieve objective
agent: individual employed by the principal to achieve principal's objective
CORRECT ANSWERS
What is external auditors independence called? - Answer- independent outside auditors;
conform to strict rules
How is internal auditor independence established? - Answer- by who they report to
within the organization
Audits internal auditors may perform - Answer- evaluate risks and controls
financial- helping external auditors
operational
compliance
What is the difference between the criteria of internal and external auditors? - Answer-
internal have a broader criteria while external have a uniform criteria
Can an internal auditor be external to an organization - Answer- yes
Two main external audit standards that address internal audit for non issuers - Answer-
1. AU-C 315- Understanding the Entity
2. AU-C 610 Using the Work of Internal Auditors
Two main external audit standards that address internal audit for issuers - Answer- 1.
AS 2605- Consideration of IAF
2. AS 2110- Identifying and Assessing Risks of MM
What is governance - Answer- the act or process of governing or overseeing the control
and direction of something
Internal audit does what? - Answer- evaluates and improves risk management, control,
and governance
Things internal audit does vs does not do - Answer- internal audit evaluates and
improves processes but does not guide or lead them
Governance - Answer- process conducted by the board of directors to authorize, direct,
and oversee mgmt toward the achievement of the organization's objectives
, Risk management - Answer- process conducted by management to understand and
deal with uncertainties that could affect the ability of the organization to achieve its
objectives
control - Answer- process conducted by mgmt to mitigate risks to an acceptable level
accounting - Answer- collection, classification, summarization, and communication of
financial data as they affect and represent a given entity
auditing - Answer- review the measurements and communications of accounting for
propreity; analytical but not constructive
financial accounting intended audience - Answer- non-insiders
managerial accounting intended audience - Answer- insiders- managers
tax intended audience - Answer- government
audit intended audience - Answer- gov, non insiders, insiders
3 phases of internal audit - Answer- planning
performing and evaluating
communicating outcomes
planning phase of internal audit - Answer- obtain an understanding of the auditee or
customer
set objectives
determine required evidence
decide nature, extent and timing of audit tests
performing and evaluating - Answer- application of specific audit procedures
document procedures and results
evaluate the evidence to reach conclusions and give practical advice
communicating outcomes - Answer- accurate, objective, clear, concise, constructive,
complete, and timely
what circumstances do we use internal auditing? - Answer- specific concern or non
specifc
why are internal audits performed? - Answer- primarily for the benefit of management
and the Board of Directors
why do we have internal auditing? - Answer- because of the principal agent model
principal- individual who employs agents to achieve objective
agent: individual employed by the principal to achieve principal's objective
