Question 1

Controls that specifically encourage operating efficiency are often called preventive controls.

Accepted Answer

A) True 
 B)False

Question 2

The maintenance of backup copies of a company's important transaction and master files is an example of a:

Accepted Answer

A) Preventive control procedure 
B) Detective control procedure 
C) Corrective control procedure 
D) Management-by-exception control procedure 
A) Preventive control procedure 
B) Detective control procedure 
C) Corrective control procedure 
D) Management-by-exception control procedure

Question 3

With respect to risk response strategies, which of the following would be a "risk sharing" approach?

Accepted Answer

A) XYZ company enters the market as a provider of car insurance to high credit risk clients; however, they diversify their portfolio by targeting 40% of their marketing efforts to traditional "safe credit" customers. 
B) LGW Communications employs a series of manual and automated controls to manage inventory shrinkage (inventory going missing due to damage or theft)in an effort to keep inventory costs in line with industry standards. 
C) JLW Industries is a holding company with a division that specializes in high-risk offshore oil drilling.Given the recent Gulf oil spill and vicious backlash from consumers and politicians, JLW decides to divest itself of the oil drilling division. 
D) XYZ company is concerned that they do not have the capability to bring a new product to market, so they enter into a joint venture with ABC company; XYZ will handle design and marketing of the new product, while ABC will handle manufacturing and logistics. 
A) XYZ company enters the market as a provider of car insurance to high credit risk clients; however, they diversify their portfolio by targeting 40% of their marketing efforts to traditional "safe credit" customers. 
B) LGW Communications employs a series of manual and automated controls to manage inventory shrinkage (inventory going missing due to damage or theft)in an effort to keep inventory costs in line with industry standards. 
C) JLW Industries is a holding company with a division that specializes in high-risk offshore oil drilling.Given the recent Gulf oil spill and vicious backlash from consumers and politicians, JLW decides to divest itself of the oil drilling division. 
D) XYZ company is concerned that they do not have the capability to bring a new product to market, so they enter into a joint venture with ABC company; XYZ will handle design and marketing of the new product, while ABC will handle manufacturing and logistics.

Question 4

Suppose a company established training programs that teach employees to perform their job functions more efficiently and effectively.This is an example of which type of control?

Accepted Answer

A) Detective 
B) Preventive 
C) Corrective 
D) none of the above 
A) Detective 
B) Preventive 
C) Corrective 
D) none of the above

Question 5

Freije Refrigeration Company has an inventory of raw materials and parts consisting of thousands of different items which are of small dollar value individually but significant in total.A fundamental control requirement of Freije's inventory system is that:

Accepted Answer

A) Perpetual inventory records be maintained for all inventory items 
B) The taking of physical inventories be conducted on a cycle basis rather than at year?end 
C) The storekeeping function not be combined with the production and inventory record?keeping functions 
D) Material requisitions be approved by an officer of the company 
A) Perpetual inventory records be maintained for all inventory items 
B) The taking of physical inventories be conducted on a cycle basis rather than at year?end 
C) The storekeeping function not be combined with the production and inventory record?keeping functions 
D) Material requisitions be approved by an officer of the company

Question 6

At a movie?theater box office, all tickets are prenumbered.At the end of each day, the beginning ticket number is subtracted from the ending number to give the number of tickets sold.Cash is counted and compared with the number of tickets sold.

Accepted Answer

A) The box office gives too much change 
B) The ticket taker admits his friends without a ticket 
C) The manager gives theater passes for personal expenses, which is against company policy 
D) A test check of customers entering the theater does not reconcile with ticket sales 
E) Tickets from a previous day are discovered in the ticket taker's stub box despite the fact that tickets are stamped "Good on Date of Purchase Only" 
A) The box office gives too much change 
B) The ticket taker admits his friends without a ticket 
C) The manager gives theater passes for personal expenses, which is against company policy 
D) A test check of customers entering the theater does not reconcile with ticket sales 
E) Tickets from a previous day are discovered in the ticket taker's stub box despite the fact that tickets are stamped "Good on Date of Purchase Only"

Question 7

Which of the following statements is true?

Accepted Answer

A) The 2013 COSO Report failed to define internal control 
B) The 2013 COSO Report emphasized that an internal control system is a tool of management 
C) SAS 78 rejected the definition of internal control provided in the COSO report 
D) COBIT 5 concluded that a company's management is not responsible for establishing and monitoring a company's internal control system 
A) The 2013 COSO Report failed to define internal control 
B) The 2013 COSO Report emphasized that an internal control system is a tool of management 
C) SAS 78 rejected the definition of internal control provided in the COSO report 
D) COBIT 5 concluded that a company's management is not responsible for establishing and monitoring a company's internal control system

Question 8

The preventative controls within a company's internal control system:

Accepted Answer

A) Form the foundation for all of a company's other internal control components 
B) Focus on management's philosophy and operating style 
C) Ignore the risk factor associated with a company's control procedures 
D) Relate to safeguarding a company's assets and checking the accuracy and reliability of the company's accounting data 
A) Form the foundation for all of a company's other internal control components 
B) Focus on management's philosophy and operating style 
C) Ignore the risk factor associated with a company's control procedures 
D) Relate to safeguarding a company's assets and checking the accuracy and reliability of the company's accounting data

Question 9

The duties of cashier and accounts?receivable bookkeeper should be separated.

Accepted Answer

A) There are two cashiers.At the end of a certain day, there is a sizable cash shortage; each cashier blames the other and it is impossible to fix responsibility 
B) A cash shortage is covered by overfooting (overadding)cash in transit on the bank reconciliation 
C) A cash shortage is covered by charging it to "Miscellaneous General Expenses" 
D) Customers who paid their accounts in cash complain that they still receive statements of balances due 
E) The accounts?receivable bookkeeper charges off the accounts of friends to "Allowance for Uncollectible Accounts" 
A) There are two cashiers.At the end of a certain day, there is a sizable cash shortage; each cashier blames the other and it is impossible to fix responsibility 
B) A cash shortage is covered by overfooting (overadding)cash in transit on the bank reconciliation 
C) A cash shortage is covered by charging it to "Miscellaneous General Expenses" 
D) Customers who paid their accounts in cash complain that they still receive statements of balances due 
E) The accounts?receivable bookkeeper charges off the accounts of friends to "Allowance for Uncollectible Accounts"

Question 10

Which one of the following would be most effective in deterring the commission of fraud?

Accepted Answer

A) Policies of strong internal control, segregation of duties, and requiring employees to take vacations 
B) Policies of strong internal control and punishments for unethical behavior 
C) Employee training, segregation of duties, and punishment for unethical behavior 
D) Hiring ethical employees, employee training, and segregation of duties 
A) Policies of strong internal control, segregation of duties, and requiring employees to take vacations 
B) Policies of strong internal control and punishments for unethical behavior 
C) Employee training, segregation of duties, and punishment for unethical behavior 
D) Hiring ethical employees, employee training, and segregation of duties

Question 11

The control environment is a component of a company's internal control system that:

Accepted Answer

A) Influences the control awareness of a company's employees 
B) Stresses the development of control procedures in a company 
C) Directly affects the accuracy and reliability of a company's accounting data 
D) Can be ignored when establishing a company's internal control system 
A) Influences the control awareness of a company's employees 
B) Stresses the development of control procedures in a company 
C) Directly affects the accuracy and reliability of a company's accounting data 
D) Can be ignored when establishing a company's internal control system

Question 12

Control activities and monitoring are one and the same.

Accepted Answer

A) True 
 B)False

Question 13

The personnel subsystem has the important function of matching job qualifications to people qualifications.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true regarding timely performance reports?

Accepted Answer

A) In many companies, these reports are the major means of providing information to management concerning the actual operations of the companies' internal control systems 
B) These reports should only include monetary data 
C) Since these reports fail to provide feedback to management on the operations of previously implemented internal control procedures, other techniques are needed to provide this feedback to managers 
D) The complexity that a computer introduces into a company's information system will typically prevent the preparation of timely performance reports for the company's management 
A) In many companies, these reports are the major means of providing information to management concerning the actual operations of the companies' internal control systems 
B) These reports should only include monetary data 
C) Since these reports fail to provide feedback to management on the operations of previously implemented internal control procedures, other techniques are needed to provide this feedback to managers 
D) The complexity that a computer introduces into a company's information system will typically prevent the preparation of timely performance reports for the company's management

Question 15

A good audit trail is an important element within a company's internal control system.

Accepted Answer

A) True 
 B)False

Question 16

Timely performance reports contribute towards achieving the monitoring component of an internal control system.

Accepted Answer

A) True 
 B)False

Question 17

A company's control environment is unimportant when developing an internal control system.

Accepted Answer

A) True 
 B)False

Question 18

An audit trail problem associated with computerized data processing is that certain financial data processed by the computer may never be seen by the company's management.

Accepted Answer

A) True 
 B)False

Question 19

The Enterprise Risk Management (ERM)framework in the 2004 COSO Report was based on the 1992 COSO report and adds three additional components for an effective internal control system.Which of the following is not one of those three?

Accepted Answer

A) Objective setting 
B) Event identification 
C) Control assessment 
D) Risk response 
A) Objective setting 
B) Event identification 
C) Control assessment 
D) Risk response

Question 20

Risk response represents a series of actions taken by management to implement a desired risk management strategy.

Accepted Answer

A) True 
 B)False

Controls that specifically encourage operating efficiency are often called preventive controls.

The maintenance of backup copies of a company's important transaction and master files is an example of a:

With respect to risk response strategies, which of the following would be a "risk sharing" approach?

Suppose a company established training programs that teach employees to perform their job functions more efficiently and effectively.This is an example of which type of control?

Freije Refrigeration Company has an inventory of raw materials and parts consisting of thousands of different items which are of small dollar value individually but significant in total.A fundamental control requirement of Freije's inventory system is that:

At a movie?theater box office, all tickets are prenumbered.At the end of each day, the beginning ticket number is subtracted from the ending number to give the number of tickets sold.Cash is counted and compared with the number of tickets sold.

Which of the following statements is true?

The preventative controls within a company's internal control system:

The duties of cashier and accounts?receivable bookkeeper should be separated.

Which one of the following would be most effective in deterring the commission of fraud?

The control environment is a component of a company's internal control system that:

Control activities and monitoring are one and the same.

The personnel subsystem has the important function of matching job qualifications to people qualifications.

Which of the following statements is true regarding timely performance reports?

A good audit trail is an important element within a company's internal control system.

Timely performance reports contribute towards achieving the monitoring component of an internal control system.

A company's control environment is unimportant when developing an internal control system.

An audit trail problem associated with computerized data processing is that certain financial data processed by the computer may never be seen by the company's management.

The Enterprise Risk Management (ERM)framework in the 2004 COSO Report was based on the 1992 COSO report and adds three additional components for an effective internal control system.Which of the following is not one of those three?

Risk response represents a series of actions taken by management to implement a desired risk management strategy.

Accounting Information Systems and the Accountant

Accounting on the Internet

Information Technology and Aiss

Accounting and Data Analytics

Integrated Accounting and Enterprise Software

Computer Controls for Organizations and Accounting Information Systems

Accounting Information Systems and Business Processes: Part I

Accounting Information Systems and Business Processes: Part II

Cybercrime, Fraud, and Ethics

Information Technology Auditing

Documenting Accounting Information Systems

Developing and Implementing Effective Accounting Information Systems

Database Design

Organizing and Manipulating the Data in Databases

Database Forms and Reports

Filters

Exam 6: Introduction to Internal Control Systems and Risk Management

Controls that specifically encourage operating efficiency are often called preventive controls.

The maintenance of backup copies of a company's important transaction and master files is an example of a:

With respect to risk response strategies, which of the following would be a "risk sharing" approach?

Suppose a company established training programs that teach employees to perform their job functions more efficiently and effectively.This is an example of which type of control?

Freije Refrigeration Company has an inventory of raw materials and parts consisting of thousands of different items which are of small dollar value individually but significant in total.A fundamental control requirement of Freije's inventory system is that:

At a movie?theater box office, all tickets are prenumbered.At the end of each day, the beginning ticket number is subtracted from the ending number to give the number of tickets sold.Cash is counted and compared with the number of tickets sold.

Which of the following statements is true?

The preventative controls within a company's internal control system:

The duties of cashier and accounts?receivable bookkeeper should be separated.

Which one of the following would be most effective in deterring the commission of fraud?

The control environment is a component of a company's internal control system that:

Control activities and monitoring are one and the same.

The personnel subsystem has the important function of matching job qualifications to people qualifications.

Which of the following statements is true regarding timely performance reports?

A good audit trail is an important element within a company's internal control system.

Timely performance reports contribute towards achieving the monitoring component of an internal control system.

A company's control environment is unimportant when developing an internal control system.

An audit trail problem associated with computerized data processing is that certain financial data processed by the computer may never be seen by the company's management.

The Enterprise Risk Management (ERM)framework in the 2004 COSO Report was based on the 1992 COSO report and adds three additional components for an effective internal control system.Which of the following is not one of those three?

Risk response represents a series of actions taken by management to implement a desired risk management strategy.

Accounting Information Systems and the Accountant

Accounting on the Internet

Information Technology and Aiss

Accounting and Data Analytics

Integrated Accounting and Enterprise Software

Computer Controls for Organizations and Accounting Information Systems

Accounting Information Systems and Business Processes: Part I

Accounting Information Systems and Business Processes: Part II

Cybercrime, Fraud, and Ethics

Information Technology Auditing

Documenting Accounting Information Systems

Developing and Implementing Effective Accounting Information Systems

Database Design

Organizing and Manipulating the Data in Databases

Database Forms and Reports

Filters