Question 1

Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements?

Accepted Answer

A)  a statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting 
B)  a statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting 
C)  a statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting 
D)  a statement that the external auditors are solely responsible for establishing and maintaining an adequate system of internal control

Question 2

Discuss what is meant by the term "control environment" and identify four control environment subcomponents that the auditor should consider.

Accepted Answer

The answer of Discuss what is meant by the term...

Question 3

A ________ is responsible for controlling the use of computer programs, transaction files and other computer records and documentation and releases them to the operators only when authorized.

Accepted Answer

A)  software engineer 
B)  chief computer operator 
C)  librarian 
D)  data control operator

Question 4

To promote operational efficiency, the internal audit department would ideally report to

Accepted Answer

A)  line management. 
B)  the PCAOB. 
C)  the Chief Accounting Officer. 
D)  the audit committee.

Question 5

Which of the following best describes the purpose of control activities?

Accepted Answer

A)  the actions, policies and procedures that reflect the overall attitudes of management 
B)  the identification and analysis of risks relevant to the preparation of financial statements 
C)  the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives 
D)  activities that deal with the ongoing assessment of the quality of internal control by management

Question 6

The auditor is always concerned with their audit client's controls that affect the efficiency and the effectiveness of company operations, as these controls will always influence the fair presentation of the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Auditing standards prohibit reliance on the work of internal auditors due to the lack of independence of the internal auditors.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an accurate statement regarding the auditor's responsibility for understanding internal control?

Accepted Answer

A)  Transaction-related audit objectives typically have no impact on the rights and obligations objectives. 
B)  Transaction-related audit objectives typically have a significant impact on the balance-related audit objective of realizable value. 
C)  Auditors generally emphasize internal control over account balances rather than classes of transactions. 
D)  Auditors and management are both equally concerned about controls that affect the efficiency and effectiveness of company operations.

Question 9

A large portion of errors in IT systems result from data entry errors.

Accepted Answer

A) True 
 B)False

Question 10

Digital signatures are used by individuals and companies engaged in e-commerce to guarantee the integrity and the authenticity of transactions or agreements executed between parties.

Accepted Answer

A) True 
 B)False

Question 11

Under the Dodd-Frank federal financial reform legislation, all public companies are required to obtain an audit report on internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following controls prevent and detect errors while transaction data are processed?

Accepted Answer

A)  software 
B)  application 
C)  processing 
D)  transaction

Question 13

It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the

Accepted Answer

A)  cost/benefit relationship of the system of internal control. 
B)  achievement of the objectives of internal control. 
C)  comparison of recorded accountability with assets. 
D)  timing of the tests to be performed.

Question 14

The most important output control is

Accepted Answer

A)  distribution control, which assures that only authorized personnel receive the reports generated by the system. 
B)  review of data for reasonableness by someone who knows what the output should look like. 
C)  control totals, which are used to verify that the computer's results are correct. 
D)  logic tests, which verify that no mistakes were made in processing.

Question 15

Management's report on internal controls must identify the framework used to evaluate the effectiveness of internal controls, and this framework may include other internal control frameworks which exist around the world.

Accepted Answer

A) True 
 B)False

Question 16

Describe each of the three broad objectives management typically has for internal control. With which of these objectives is the auditor primarily concerned?

Accepted Answer

The answer of Describe each of the three broad objectives...

Question 17

A system of internal controls consisting of policies and procedures are designed to provide management with reasonable assurance that the company can achieve its goals and objectives.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following best describes an entity's accounting information and communication system?

Accepted Answer

A)   
B)   
C)   
D)

Question 19

Section 404 of the Sarbanes-Oxley Act requires that both private and public companies issue an internal control report.

Accepted Answer

A) True 
 B)False

Question 20

Management's identification and analysis of risk is an ongoing process and is a critical component of effective internal control. An important first step is for management to identify factors that may increase risk. Identify at least five factors, observable by management, which may lead to increased risk in a typical business organization.

Accepted Answer

The answer of Management's identification and analysis of risk is...

Exam 11: Internal Control and Coso Framework

Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements?

Discuss what is meant by the term "control environment" and identify four control environment subcomponents that the auditor should consider.

A ________ is responsible for controlling the use of computer programs, transaction files and other computer records and documentation and releases them to the operators only when authorized.

To promote operational efficiency, the internal audit department would ideally report to

Which of the following best describes the purpose of control activities?

The auditor is always concerned with their audit client's controls that affect the efficiency and the effectiveness of company operations, as these controls will always influence the fair presentation of the financial statements.

Auditing standards prohibit reliance on the work of internal auditors due to the lack of independence of the internal auditors.

Which of the following is an accurate statement regarding the auditor's responsibility for understanding internal control?

A large portion of errors in IT systems result from data entry errors.

Digital signatures are used by individuals and companies engaged in e-commerce to guarantee the integrity and the authenticity of transactions or agreements executed between parties.

Under the Dodd-Frank federal financial reform legislation, all public companies are required to obtain an audit report on internal control over financial reporting.

Which of the following controls prevent and detect errors while transaction data are processed?

It is important for the CPA to consider the competence of the clients' personnel because their competence has a direct impact upon the

The most important output control is

Management's report on internal controls must identify the framework used to evaluate the effectiveness of internal controls, and this framework may include other internal control frameworks which exist around the world.

Describe each of the three broad objectives management typically has for internal control. With which of these objectives is the auditor primarily concerned?

A system of internal controls consisting of policies and procedures are designed to provide management with reasonable assurance that the company can achieve its goals and objectives.

Which of the following best describes an entity's accounting information and communication system?

Section 404 of the Sarbanes-Oxley Act requires that both private and public companies issue an internal control report.