5. Internal Control Concepts and Information Technology

Question 1

How does fixing a responsibility to an employee improve internal control?

Answer 1

Because it makes it easier to trace problems back to the person(s) responsible and hold them accountable for their actions.

Question 2

What are the five components to internal control?

Answer 2

1) the control environment
2) risk assessment process
3) control activities
4) information systems
5) monitoring of controls

Question 3

Decision tables differ from program flowcharts in that decision tables emphasize

Answer 3

Logical relationships amount conditions and actions

Question 4

In an audit of financial statements of a nonissuer in accordance with GAAS, an auditor is required to

Answer 4

Document the auditor’s understanding of the entity’s internal control components

Question 5

What are control activities that may be relevant to an audit?

Answer 5

(1) performance reviews (2) information processing (3) physical controls (4) authorization (5) segregation of duties