Exam 8: Internal Control and COSO Framework

A)List the four types of general computer control systems.B)Adequate segregation of duties is an important control procedure.Describe the specific functions that should be separated for segregation of duties to prevent both intentional and unintentional misstatements that are of significance to auditors.C)Adequate documents and records are important for effective internal control.Five principles dictate the proper design and use of documents and records.One principle is that documents and records should be prenumbered consecutively to facilitate control over missing documents and to aid in locating documents when they are needed at a later date.Discuss each of the other four principles of adequate documents and records.

The first step for management in the risk assessment process is to identify factors that may increase risk,for example failure to meet prior objectives.Then,management will

The control environment consists of actions,policies,and procedures that

Which of the following duties would indicate a weakness in internal controls?

Carrie is the manager of the Bay Street Pharmacy.Carrie is considering implementing a security tag system to reduce the losses related to stolen goods at their store.The system Carrie is looking at currently costs $60 000 and is expected to be effective for 5 years.In order to justify the implementation of the security tag system,average theft per year should be at least

Effective internal control in a small company that has an insufficient number of employees to permit proper division of responsibilities can best be enhanced by

Joan is the owner of a small manufacturing company.In prior years,your firm has conducted a review engagement of the company.However,this year,Joan obtained a loan from the federal business development bank and is required to have an audit of her financial statements.When you started asking about controls and procedures at the company,Joan got pretty upset. "All you need to be concerned about is the numbers! Why are you asking all of these questions? It takes too much time away from my staff to answer these questions! Just check the numbers and let us get on with our work!" You calmed her down a bit,and reminded her about the general discussion that occurred with the engagement letter.You have invited her for coffee to briefly explain the following items: 1.Why auditors are concerned about internal controls. 2.Why auditors are required to be concerned about internal controls. 3.What you need to do to understand internal controls. 4.What you will do once you have documented your understanding of internal controls. Required: Explain what you will say to Joan.

Management assesses risks as a part of designing and operating internal controls to minimize fraud and errors.Auditors assess risks to

External auditor Maryann Smith may not rely on the work of internal auditor Raymond Jones unless

An important type of protective measure for safeguarding assets and records is

Management's objectives with respect to internal control include

A)The COSO internal control framework consists of five components.Describe each of these components. B)Custody of assets and reconciliation should be separated to contribute to strong internal control.List the general categories of activities that should be separated.

Which of the following is an example of a general authorization?

A firewall allows the organization to

Bravo Design had IMB consulting provide them with a service center to record the job costs and sales in progress.What process did Bravo Design follow?

As a first time auditor of a small company,what will be your strategy to obtain an understanding of internal controls of the company?

An example of general computer control systems that provide reasonable assurance of authorization of application systems is

Why is it important to separate systems development (or acquisition)and program maintenance activities from accounting?

A)Describe the three basic concepts (assumptions)underlying the study of internal control and assessment of control risk.B)Describe the inherent limitations of internal control.

To comply with auditing standards,the auditor need not be concerned with all areas of internal control that apply to management.The auditor's primary concerns are with the system's ability to