17 Principles of Internal Control

Question 1

Define “inbound communications.”

Answer 1

Communications with outsiders to the organization, including customers, suppliers, external auditors, regulators, financial analysts, and others

Question 2

Define “competence” in the context of designing internal control

Answer 2

A commitment to attract, develop, and retain highly qualified individuals consistent with achieving organizational objectives. It includes establishing policies, assessing competencies, and planning for turnover and succession

Question 3

Define “risk assessment materiality.”

Answer 3

The determination of how large of a risk poses a threat to objectives

Question 4

Define “accountability” in the context of designing internal control

Answer 4

Holding individuals accountable for their internal control responsibilities

Question 5

Define “risk assessment precision.”

Answer 5

Whether, and the extent to which, risk can be quantified

Question 6

Which internal control principle relates primarily to risk reduction?

Answer 6

Control activities

Question 7

Define “organizational policies.”

Answer 7

The organization’s control activities that establish stakeholder expectations regarding conduct and operations

Question 8

Which internal control principle relates primarily to organizational objectives?

Answer 8

Risk assessment