Exam 3: Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Management Evaluation of Internal Controls. What are the steps in management's evaluation of internal control over financial reporting?

Controls to monitor results of operations are considered to be transaction controls.

Integrated audit. Explain the application of an integrated audit as it relates to regulation. Discuss the reasons that this integrated approach may occur.

All organizations should evaluates and communicates internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors, as appropriate.

Which of the following is an example of a physical control to safeguard assets?

Internal Control Principles. Identify and briefly describe the two principles that should govern the monitoring function.

Walkthroughs and inquiries are often used to obtain an understanding of internal controls.

One of the components of internal control, monitoring, refers to the process of identifying, capturing, and exchanging information in a timely fashion to enable accomplishment of the organization's objectives.

Pervasive control activities. Discuss what pervasive control activities are and provide an example of at least three.

Security management practices which limit access to technologies is a function included in which COSO component of internal control structure?

Which of the following is not a way management obtains evidence regarding the effectiveness of internal control over the accounting system?

The five major components of an organization's internal control are: the control environment, risk assessment, control activities, information and communication, and monitoring.

Physical controls to safeguard assets are not intended to include simple controls such as fences and locks.

Which of the following is considered to be a transaction control?

Self-checking digit algorithms have been developed to test for transposition errors associated with identification numbers

Management is obligated to report significant deficiencies in the control structure in their annual report on internal control effectiveness required by the Sarbanes-Oxley Act.

Corporate policies designed to attract, train, and evaluate competent employees are considered to be control activities in the COSO framework for internal controls.

Which of the following is considered to be an entity-wide control?

A deficiency in design of internal controls exists when an existing control is not properly designed so that, even if the control operates as designed, the control objective would not be met.

Control environment. One of the elements of an organization's control system is the "control environment." Identify at least four factors that the auditor should consider when reviewing the control environment and discuss how the auditor would relate this review to the assessment of control risk.