11.6 Learning Objective 11-6
1) It is management's responsibility to issue a report on internal control.
2) Publicly-traded companies have the option to have the financial statements audited.
3) Publicly-traded companies have to file their annual financial statements with the Securities and Exchange Commission.
4) An audit report is addressed to the board of directors and stockholders of the audited company.
5) It is NOT the independent auditor's responsibility to determine whether the audited company's financial statements comply with GAAP.
6) The combined audit report on a company's financial statements and internal control over financial reporting typically contains five paragraphs.
7) The financial statements are the responsibility of:
A) the independent auditors.
B) the shareholders.
C) management.
D) the board of directors.
8) The statement of management's responsibility for internal control, issued along with a company's financial statements, indicates all of the following EXCEPT
that management:
A) is responsible for establishing and maintaining an adequate system of internal control.
B) conducted an assessment of internal control over financial reporting based on the framework established by COSO.
C) states that the internal controls of the company have been audited by the company's outside auditors.
D) states that the internal controls of the company have been designed by the company's outside auditors.
9) Which entity requires companies issuing publicly traded stock to have their financial statements audited by an external auditor?
A) Securities and Exchange Commission
B) Internal Revenue Service
C) Committee of Sponsoring Organizations
D) Financial Accounting Standards Board
10) The independent auditors' report is addressed to:
A) management.
B) board of directors only.
C) stockholders only.
D) board of directors and stockholders.
11) A typical, unqualified audit report indicates that the audited company's:
A) financial statements are presented in accordance with GAAP.
B) financial statements present fairly the company's financial condition and operating performance for a period of time.
C) financial statements provide substantial evidence that the company is a safe investment.
D) A and B
12) Which statement about a company's internal controls over financial reporting is FALSE?
A) Management must determine whether the internal controls over financial reporting are effective.
B) The internal controls over financial reporting are the responsibility of management.
C) The internal controls over financial reporting are studied and assessed by management.
D) The internal controls over financial reporting are established by the outside auditors.
13) The audit report written by the outside auditors evaluates a company's:
A) financial statements only.
B) internal controls over financial reporting only.
C) management skills.
D) financial statements and internal controls over financial reporting.
14) The first paragraph of the combined audit report on financial statements and internal controls:
A) describes how the audit was performed in accordance with GAAP and other auditing standards.
B) describes a system of internal controls.
C) describes inherent limitations in a system of internal controls.
D) identifies the company and financial statements audited.