Question 1

Which COSO component of internal control concerns the process of identifying, capturing, and exchanging information in a timely fashion to enable accomplishment of the organization's objectives?

Accepted Answer

A)  Control activities. 
B)  Information and communication. 
C)  Monitoring. 
D)  Control environment.

Question 2

Generally, highly regulated entities have more complex control activities than less-regulated entities.

Accepted Answer

A) True 
 B)False

Question 3

Which statement is true concerning the documentation of internal control?

Accepted Answer

A)  Documentation should be sufficient to support the design and operating effectiveness of internal controls. 
B)  Documentation requirements are standardized by the PCAOB. 
C)  Documentation of disbursements require paper and electronic documentation. 
D)  Documentation of all transaction controls should be tested on an annual basis.

Question 4

Which of the following is not true of internal control as defined by COSO?

Accepted Answer

A)  It is narrower than internal control over financial reporting. 
B)  It is a process that includes all elements of internal control working together. 
C)  It includes all the people in the organization. 
D)  It starts at the top of the organization in setting a tone.

Question 5

Which of the following is an example of a detective control in an information system?

Accepted Answer

A)  Automated reports to management that specifically identify delinquent receivables. 
B)  A requirement that salaried employees submit written requests to work overtime. 
C)  Assurance from top management that computer centers are kept locked. 
D)  The employment of trustworthy people to enter data into the information system.

Question 6

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?

Accepted Answer

A)  Better understand the client, its risks, and how it manages those risks. 
B)  Assess control risk and identify the types of financial statement misstatements that are most likely to occur. 
C)  Plan direct tests of account balances to determine if misstatements have occurred. 
D)  All are reasons why auditors must gain an understanding of the client's internal control system.

Question 7

Which one of the following groups is interested in an organization's control structure?

Accepted Answer

A)  Board members. 
B)  Lenders. 
C)  Auditors. 
D)  All of the above.

Question 8

Which of the following is the most severe?

Accepted Answer

A)  Material weaknesses in internal control. 
B)  Significant deficiencies in internal control. 
C)  Operational deficiencies in internal control. 
D)  Each is equally severe because it could result in inaccuracies in financial reporting.

Question 9

Segregation of duties is a control activity that is designed to protect against the risk that an individual could both perpetrate and cover up a fraud.

Accepted Answer

A) True 
 B)False

Question 10

Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and ineffective and inefficient operations.

Accepted Answer

A) True 
 B)False

Question 11

A control designed to ensure that sales transactions are generated using the company's most current prices would be considered to be which type of control?

Accepted Answer

A)  An input control. 
B)  A processing control. 
C)  An output control. 
D)  A physical control.

Question 12

In an Integrated Audit, what is the independent external auditor primary concerned with?

Accepted Answer

A)  Detecting all errors. 
B)  Determining the effectiveness of operations. 
C)  Determining whether the internal controls are effective. 
D)  Determining whether the controls promote efficiency.

Question 13

Management's risk assessment process should be performed only by senior-level management.

Accepted Answer

A) True 
 B)False

Question 14

Internal control is a process affected by the organization's board of directors, management, and other personnel to provide reasonable assurance of achieving certain objectives. Which of the following does not fit into one of these categories of objectives?

Accepted Answer

A)  Reliability of financial reporting. 
B)  Compliance with laws and regulations. 
C)  Continuing existence. 
D)  Effectiveness and efficiency of operations.

Question 15

The quality of an organization's internal control will affect both the audit approach and the amount of testing needed for an engagement.

Accepted Answer

A) True 
 B)False

Question 16

Internal control.
Define the term "internal control" and identify the major components of an internal control system.

Accepted Answer

The answer of Internal control.
Define the term "internal control" and...

Question 17

An organization's commitment to integrity is demonstrated through the tone set by the board and management.

Accepted Answer

A) True 
 B)False

Question 18

A material control weakness is a deficiency in internal control such that a reasonable probability exists that a material misstatement of the company's financial statements may not be prevented or detected on a timely basis.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not included as a components of an organization's internal control structure in the COSO framework?

Accepted Answer

A)  Control risk. 
B)  The control environment. 
C)  Risk assessment. 
D)  Control activities.

Question 20

In addition to controls being specific, they may be broad, such as policies regarding a code of ethics.

Accepted Answer

A) True 
 B)False

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

Which COSO component of internal control concerns the process of identifying, capturing, and exchanging information in a timely fashion to enable accomplishment of the organization's objectives?

Generally, highly regulated entities have more complex control activities than less-regulated entities.

Which statement is true concerning the documentation of internal control?

Which of the following is not true of internal control as defined by COSO?

Which of the following is an example of a detective control in an information system?

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?

Which one of the following groups is interested in an organization's control structure?

Which of the following is the most severe?

Segregation of duties is a control activity that is designed to protect against the risk that an individual could both perpetrate and cover up a fraud.

Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and ineffective and inefficient operations.

A control designed to ensure that sales transactions are generated using the company's most current prices would be considered to be which type of control?

In an Integrated Audit, what is the independent external auditor primary concerned with?

Management's risk assessment process should be performed only by senior-level management.

Internal control is a process affected by the organization's board of directors, management, and other personnel to provide reasonable assurance of achieving certain objectives. Which of the following does not fit into one of these categories of objectives?

The quality of an organization's internal control will affect both the audit approach and the amount of testing needed for an engagement.

Internal control. Define the term "internal control" and identify the major components of an internal control system.

An organization's commitment to integrity is demonstrated through the tone set by the board and management.

A material control weakness is a deficiency in internal control such that a reasonable probability exists that a material misstatement of the company's financial statements may not be prevented or detected on a timely basis.

Which of the following is not included as a components of an organization's internal control structure in the COSO framework?

In addition to controls being specific, they may be broad, such as policies regarding a code of ethics.