Question 1

COBIT extensively examines the internal control area.

Accepted Answer

A) True 
 B)False  True

Question 2

The 1992 COSO report identifies five components for an effective internal control system.These are:

Accepted Answer

A) Control environment, risk assessment, control activities, information and communication, and monitoring 
B) Control environment, control procedures, control activities, communication, and monitoring 
C) Control procedures, control activities, information, communication, and monitoring 
D) Control procedures, risk assessment, control activities, information and communication, and monitoring 
A) Control environment, risk assessment, control activities, information and communication, and monitoring 
B) Control environment, control procedures, control activities, communication, and monitoring 
C) Control procedures, control activities, information, communication, and monitoring 
D) Control procedures, risk assessment, control activities, information and communication, and monitoring A

Question 3

Which of the following personnel policies would be the most useful in mitigating fraud or embezzlement?

Accepted Answer

A) Fidelity bonds for key employees 
B) Careful hiring procedures for key employees 
C) Having a Code of Conduct 
D) Required vacations for key employees 
A) Fidelity bonds for key employees 
B) Careful hiring procedures for key employees 
C) Having a Code of Conduct 
D) Required vacations for key employees D

Question 4

Regarding the internal audit function, which of the following statements is true?

Accepted Answer

A) Since many internal auditors have accounting backgrounds, the internal audit function should ideally be included within a company's accounting subsystem 
B) It is not proper for internal auditors to perform a fraud investigation within any part of their company's system 
C) Because of the independence of external auditors, they should never accept previous work of evaluating controls performed by a company's internal auditors 
D) Within a company's system, it is preferable to establish the internal audit function as a separate subsystem 
A) Since many internal auditors have accounting backgrounds, the internal audit function should ideally be included within a company's accounting subsystem 
B) It is not proper for internal auditors to perform a fraud investigation within any part of their company's system 
C) Because of the independence of external auditors, they should never accept previous work of evaluating controls performed by a company's internal auditors 
D) Within a company's system, it is preferable to establish the internal audit function as a separate subsystem

Question 5

An organization should always attempt to implement ideal controls into its system.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following functions performed in an organization is a violation of internal control?

Accepted Answer

A) A mail clerk opening the mail compares the cheque received with the source document accompanying the payment, noting the amount paid, then forwards the cheques daily along with a listing of the cash receipts)to the Cashier for deposit 
B) A mail clerk opening the mail compares the cheque received with the source document accompanying the payment, noting the amount paid, then forwards the source documents that accompany the payments along with a listing of the cash receipts)to Accounts Receivable, on a daily basis, for posting to the subsidiary ledger 
C) At the end of the week the Cashier prepares a deposit slip for all of the cash receipts received during the week 
D) The General Ledger clerk compares the summary journal entry, received from the Cashier for cash receipts applicable to outstanding accounts, with the batch total for posting to the Subsidiary Ledger by the Accounts Receivable clerk 
A) A mail clerk opening the mail compares the cheque received with the source document accompanying the payment, noting the amount paid, then forwards the cheques daily along with a listing of the cash receipts)to the Cashier for deposit 
B) A mail clerk opening the mail compares the cheque received with the source document accompanying the payment, noting the amount paid, then forwards the source documents that accompany the payments along with a listing of the cash receipts)to Accounts Receivable, on a daily basis, for posting to the subsidiary ledger 
C) At the end of the week the Cashier prepares a deposit slip for all of the cash receipts received during the week 
D) The General Ledger clerk compares the summary journal entry, received from the Cashier for cash receipts applicable to outstanding accounts, with the batch total for posting to the Subsidiary Ledger by the Accounts Receivable clerk

Question 7

The IT Governance Institute published a framework called Val IT, which consists of a formal statement of principles and processes for IT management.

Accepted Answer

A) True 
 B)False

Question 8

The voucher system requires that invoices be compared with receiving reports and express bills before a voucher is prepared and approved for payment.

Accepted Answer

A) Unrecorded cheques appear in the bank statement 
B) The treasurer takes funds by preparing a fictitious voucher charging "Miscellaneous General Expenses" 
C) An employee in the purchasing department sends through fictitious invoices and receives payment 
D) A cash shortage is covered by underfooting outstanding cheques on the bank reconciliation 
E) A cash shortage is covered by omitting some of the outstanding cheques from the bank reconciliation 
A) Unrecorded cheques appear in the bank statement 
B) The treasurer takes funds by preparing a fictitious voucher charging "Miscellaneous General Expenses" 
C) An employee in the purchasing department sends through fictitious invoices and receives payment 
D) A cash shortage is covered by underfooting outstanding cheques on the bank reconciliation 
E) A cash shortage is covered by omitting some of the outstanding cheques from the bank reconciliation

Question 9

Many organizations have an internal audit function that makes periodic reviews of each department within the organization.The focus of these reviews is to:

Accepted Answer

A) Conduct an investigation of each department to be sure fraud is not taking place 
B) Evaluate the efficiency and effectiveness of the department 
C) Evaluate the performance of the manager of the department 
D) Report to the organization's top managers and board of directors 
A) Conduct an investigation of each department to be sure fraud is not taking place 
B) Evaluate the efficiency and effectiveness of the department 
C) Evaluate the performance of the manager of the department 
D) Report to the organization's top managers and board of directors

Question 10

Which of the following statements is true regarding preventive control procedures and detective control procedures?

Accepted Answer

A) They should be interrelated 
B) If preventive controls exist, detective controls are unnecessary 
C) If detective controls exist, preventive controls are unnecessary 
D) Preventive controls should be cost effective, but detective controls do not need to be cost effective 
A) They should be interrelated 
B) If preventive controls exist, detective controls are unnecessary 
C) If detective controls exist, preventive controls are unnecessary 
D) Preventive controls should be cost effective, but detective controls do not need to be cost effective

Question 11

Which of the following factors best describes the "control environment" of a firm?

Accepted Answer

A) The integrity, ethical values, and competence of employees 
B) Management's philosophy and operating style 
C) The way management assigns authority and responsibility 
D) The direction and attention provided by the board of directors 
E) all of the above 
A) The integrity, ethical values, and competence of employees 
B) Management's philosophy and operating style 
C) The way management assigns authority and responsibility 
D) The direction and attention provided by the board of directors 
E) all of the above

Question 12

Which one of the following methods, for the distribution of employees' paycheques, would provide the best internal control for the organization?

Accepted Answer

A) Delivery of the paycheques to each department supervisor, who in turn would distribute paycheques directly to the employees in his/her department 
B) Direct deposit in each employee's personal bank account 
C) Distribution of paycheques directly to each employee by a representative of the Human Resource department 
D) Distribution of paycheques directly to each employee by the payroll manager 
A) Delivery of the paycheques to each department supervisor, who in turn would distribute paycheques directly to the employees in his/her department 
B) Direct deposit in each employee's personal bank account 
C) Distribution of paycheques directly to each employee by a representative of the Human Resource department 
D) Distribution of paycheques directly to each employee by the payroll manager

Question 13

The component of an internal control system that concerns itself with the way a company's management assigns authority and responsibility is called:

Accepted Answer

A) Monitoring 
B) Control environment 
C) Risk assessment 
D) Information 
A) Monitoring 
B) Control environment 
C) Risk assessment 
D) Information

Question 14

Regarding a company's audit trail, which of the following statements is true?

Accepted Answer

A) Because of the complexities involved in establishing an audit trail, a good audit trail normally makes it more difficult for an individual to follow the flow of a company's business transactions through the company's information system 
B) In actuality, the audit trail established within a company's information system is an unimportant element of the company's internal control system 
C) When a company's audit trail becomes more difficult to follow, this causes an increase in the risk of errors or irregularities taking place in the processing of accounting transactions and not being detected 
D) A company's policies and procedures manual should not be part of its audit trail since confidential information is included within this manual 
A) Because of the complexities involved in establishing an audit trail, a good audit trail normally makes it more difficult for an individual to follow the flow of a company's business transactions through the company's information system 
B) In actuality, the audit trail established within a company's information system is an unimportant element of the company's internal control system 
C) When a company's audit trail becomes more difficult to follow, this causes an increase in the risk of errors or irregularities taking place in the processing of accounting transactions and not being detected 
D) A company's policies and procedures manual should not be part of its audit trail since confidential information is included within this manual

Question 15

An ideal control is:

Accepted Answer

A) A control procedure that reduces to practically zero the risk of an error or an irregularity taking place and not being detected 
B) A control procedure that is anticipated to have the lowest possible cost in relation to its benefits 
C) A control procedure that should always be implemented into a company's system due to the efficiency and effectiveness that will result from its implementation 
D) A control procedure that is always cost effective 
A) A control procedure that reduces to practically zero the risk of an error or an irregularity taking place and not being detected 
B) A control procedure that is anticipated to have the lowest possible cost in relation to its benefits 
C) A control procedure that should always be implemented into a company's system due to the efficiency and effectiveness that will result from its implementation 
D) A control procedure that is always cost effective

Question 16

Which of the following fundamental concepts is stressed by the COSO report?

Accepted Answer

A) Internal control is not affected by people 
B) Internal control is geared to the achievement of a company's objectives in the financial reporting area only 
C) Internal control is designed to detect all errors and irregularities that occur within a company's system 
D) Internal control is a process 
A) Internal control is not affected by people 
B) Internal control is geared to the achievement of a company's objectives in the financial reporting area only 
C) Internal control is designed to detect all errors and irregularities that occur within a company's system 
D) Internal control is a process

Question 17

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 18

An effective approach for maintaining a good audit trail for cash disbursements is to utilize a voucher system with coins and currency issued for each disbursement.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

COBIT extensively examines the internal control area.

The 1992 COSO report identifies five components for an effective internal control system.These are:

Which of the following personnel policies would be the most useful in mitigating fraud or embezzlement?

Regarding the internal audit function, which of the following statements is true?

An organization should always attempt to implement ideal controls into its system.

Which one of the following functions performed in an organization is a violation of internal control?

The IT Governance Institute published a framework called Val IT, which consists of a formal statement of principles and processes for IT management.

The voucher system requires that invoices be compared with receiving reports and express bills before a voucher is prepared and approved for payment.

Many organizations have an internal audit function that makes periodic reviews of each department within the organization.The focus of these reviews is to:

Which of the following statements is true regarding preventive control procedures and detective control procedures?

Which of the following factors best describes the "control environment" of a firm?

Which one of the following methods, for the distribution of employees' paycheques, would provide the best internal control for the organization?

The component of an internal control system that concerns itself with the way a company's management assigns authority and responsibility is called:

Regarding a company's audit trail, which of the following statements is true?

An ideal control is:

Which of the following fundamental concepts is stressed by the COSO report?

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.

An effective approach for maintaining a good audit trail for cash disbursements is to utilize a voucher system with coins and currency issued for each disbursement.

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

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?

Accounting Information Systems and the Accountant

Information Technology and Aiss

Data Modeling

Organizing and Manipulating the Data in Databases

Database Forms and Reports

Documenting Accounting Information Systems

Accounting Information Systems and Business Processes: Part I

Accounting Information Systems and Business Processes: Part II

Computer Controls for Organizations and Accounting Information Systems

Computer Crime, Fraud, Ethics, and Privacy

Information Technology Auditing

Developing and Implementing Effective Accounting Information Systems

Accounting on the Internet

Accounting and Enterprise Software

Filters

Exam 9: Introduction to Internal Control Systems

COBIT extensively examines the internal control area.

The 1992 COSO report identifies five components for an effective internal control system.These are:

Which of the following personnel policies would be the most useful in mitigating fraud or embezzlement?

Regarding the internal audit function, which of the following statements is true?

An organization should always attempt to implement ideal controls into its system.

Which one of the following functions performed in an organization is a violation of internal control?

The IT Governance Institute published a framework called Val IT, which consists of a formal statement of principles and processes for IT management.

The voucher system requires that invoices be compared with receiving reports and express bills before a voucher is prepared and approved for payment.

Many organizations have an internal audit function that makes periodic reviews of each department within the organization.The focus of these reviews is to:

Which of the following statements is true regarding preventive control procedures and detective control procedures?

Which of the following factors best describes the "control environment" of a firm?

Which one of the following methods, for the distribution of employees' paycheques, would provide the best internal control for the organization?

The component of an internal control system that concerns itself with the way a company's management assigns authority and responsibility is called:

Regarding a company's audit trail, which of the following statements is true?

An ideal control is:

Which of the following fundamental concepts is stressed by the COSO report?

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.

An effective approach for maintaining a good audit trail for cash disbursements is to utilize a voucher system with coins and currency issued for each disbursement.

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

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?

Accounting Information Systems and the Accountant

Information Technology and Aiss

Data Modeling

Organizing and Manipulating the Data in Databases

Database Forms and Reports

Documenting Accounting Information Systems

Accounting Information Systems and Business Processes: Part I

Accounting Information Systems and Business Processes: Part II

Computer Controls for Organizations and Accounting Information Systems

Computer Crime, Fraud, Ethics, and Privacy

Information Technology Auditing

Developing and Implementing Effective Accounting Information Systems

Accounting on the Internet

Accounting and Enterprise Software

Filters