BEC

Question 1

components of internal control In the COSO (2011) “cube” model

Answer 1

Monitoring
Risk Assessment
Control Activities

Question 2

According to the 17 COSO control principles, ‘organizational objectives’ primarily relate to which fundamental component of internal control?

Answer 2

Risk Assessment
[According to the COSO principles, the control environment includes establishing integrity and ethical values in the organizational culture.]

Question 3

Strategic, operations, reporting, and compliance objectives are a part of which of the following models of internal control?

Answer 3

COSO ERM

Question 4

According to COSO, the use of ongoing and separate evaluations to identify and address changes in internal control effectiveness can best be accomplished in which of the following stages of the monitoring‐for‐change continuum?

Answer 4

Change identification.
[Control Revalidation and update is concerned with revalidation after changes in controls, rather than on ongoing and separate evaluations intended to identify changes in internal control effectiveness.]

Question 5

One of the Rules of Conduct in the IIA’s Code of Ethics states, “Internal auditors shall perform internal audit services in accordance with the International Standards for the Professional Practice of Internal Auditing.” To which Principle of the Code of Ethics does this Rule of Conduct relate?

Answer 5

Competency

Question 6

COSO Model - Control Monitoring Process

Answer 6

ESTABLISH FOUNDATION
- Tone at the top
- Organizational Structure
- Baseline Understanding of Internal Controls
DESIGN & EXECUTION
- Prioritize Risks
- Identify Key Controls
- Identify Persuasive information about Key Controls
- Implementing monitoring Procedures
ASSESS & REPORT
- Prioritize Findings
- Report Results to appropriate level
- Follow up

Question 7

Control Monitoring Process Methods

Answer 7

Review
Bench-marking
Questionnaires
Focus Groups and Interviews

Question 8

Control Revalidation

Answer 8

Periodically re-validate that controls are working effectively, thus maintaining a continuous control baseline

Question 9

four elements of “mandatory” guidance of the IIA’s International Professional Practices Framework.

Answer 9

Internal Audit definition
Core principles of professional practice of internal auditing
Code of Ethics
Standards

Question 10

structure of authoritative guidance of the IIA’s International Professional Practices Framework.

Answer 10

Mandatory Guidance & Strongly Recommended

Question 11

structure of the IIA’s Code of Ethics

Answer 11

4 Principles & 12 rules of conduct

Question 12

principles of the IIA’s Code of Ethics

Answer 12

Integrity
Objectivity
Competence
Confidentiality

Question 13

structure of standards

Answer 13

Statements of basic requirements of Internal audit
Interpretation
glossary of terms

Question 14

Categories of standards

Answer 14

Attributes

Performance

Question 15

Michael Porter’s 4 attributes that promoted or impeded the creation of competitive advantage. Also known as the ‘diamond elements’

Answer 15

factor conditions
demand conditions
firm strategy, structure & rivalry
related supporting industries

Question 16

diamond elements affect four factors that lead to a national competitive advantage. what are they?

Answer 16

resources and skills available
decision to pursue goals with available resources
individuals’ agenda inside organizations
pressure on firms to invest and invest

Question 17

5 major and 3 non major factors influencing currency rates/demand

Answer 17

5 major

• inflation
• current account balance
• political & economic environment/ stability
• relative interest rates
• public debt levels

3 non major

• consumer references
• relative income
• speculation

Question 18

Dodd frank accorded whistleblowers to bypass OSHA and file suit in federal court

Answer 18

Sox did not allow that.

Question 19

Preventive control

Detective control

Corrective control

Answer 19

Preventive control stops or prevents breaches immediately. prevents incidents from occurring. A firewall PREVENTS hackers from accessing the records

A detective control does not prevent incidents from occurring. like a burglar alarm might call the police, i only indicates an incident may have occurred. review of credit card statement is a detective control

Corrective controls do not prevent breaches. They limit the impact of the breach on the organization by correcting the vulnerability. Backing up files to enable data restoration after a system crash is a corrective control

Questions to ask your self when asked to identify type of control

Does it PREVENT? DETECT? CORRECT?

Question 20

component of internal control that concerns with the policies and procedures that ensure that actions are taken to address the risks related to the achievement of management’s objectives.

Answer 20

Control activities - comes after Risk assessment because you need to assess the risk before you address them, DUH!

Question 21

risk reduction primarily relates to which fundamental component of internal control

Answer 21

Control activities - comes after risk assessment because you need to assess the risk before you can reduce it, DUH!

Question 22

Strategic, operations, reporting, and compliance objectives are a part of which of the following models of internal control?

Answer 22

COSO ERM

Question 23

organizational objectives primarily relate to which fundamental component of internal control:

Answer 23

Risk assessment.

Control activities addresses risk assessment

Question 24

According to COSO, the use of ongoing and separate evaluations to identify and address changes in internal control effectiveness can best be accomplished in which of the following stages of the monitoring‐for‐change continuum?

Answer 24

Change Identification

Change Management is not the best answer to this question. This stage of the monitoring for change process is concerned with, when changes occur, verifying that controls remain effective despite identified changes in controls and/or risks. Hence, the primary ongoing and separate evaluation process would be a part of change identification and not change management.

Question 25

An economic currency exchange risk

Answer 25

occurs when exchange rate changes alter the value of future revenues and costs.

Question 26

The equation for the graphic plot of a linear economic variable is D = b + m(a), where m > 0. What is the slope of the economic “curve” represented by this equation?

Answer 26

Positive slope

The graphic plot of the given equation would have a positive slope. Since the constant “m” is positive, the dependent variable “D” increases as the independent variable “a” increases (and decreases when “a” decreases).

Question 27

distinguish a change in quantity of a commodity demanded from a change in the demand for a commodity

distinguish a change in the quantity of a commodity supplied from a change in supply of a commodity.

Answer 27

• change in Qty demanded is a function of price.
• change in demand is a function of change in factors other than price
• Change in qty supplied function of price
• change in supply is a function of change in factors other than price

Question 28

Which one of the following would not cause an increase in demand for a commodity?

An increase in the number of consumers.
An increase in the price of a substitute commodity.
An increase in consumers’ preference for the commodity.
A reduction in the price of the commodity.

Answer 28

Ans: A reduction in the price of the commodity.

Expln: A reduction in price will not cause an increase in demand for a commodity, but rather will change (increase) the quantity demanded. An increase in demand causes a shift of the demand curve (up and to the right). A change in price causes movement along a specific demand curve.

Question 29

Define supply.

Answer 29

Supply is the quantity of a commodity provided at alternative prices during a specified time

Question 30

what is The principle of increasing costs

Answer 30

once the fixed factors of production are being used efficiently, increasing production (i.e., supply) will cost more than the prior average cost per unit. Therefore, increasing production (and thus increasing average cost) will occur only if that increase in average cost can be recovered through a higher sales price for the good/service.