Auditing MCQs

Which of the following is an example of a control activity in an entity’s internal control over financial reporting.

a) Segregating the duties of employees who handle cash receipts and cash disbursements
b) Confirming accounts payable balances with third parties
c) Reviewing the entity’s accounting policies and procedures
d) Performing substantive procedures to test account balances and transactions
Answer: a) Segregating the duties of employees who handle cash receipts and cash disbursements

Which of the following is an example of an inherent limitation of an audit.

a) The need for the auditor to rely on the entity’s internal controls over financial reporting
b) The need for the auditor to obtain sufficient and appropriate audit evidence
c) The need for the auditor to maintain an attitude of professional skepticism
d) The need for the auditor to have adequate knowledge of the entity’s industry
Answer: a) The need for the auditor to rely on the entity’s internal controls over financial reporting

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