Chapter 6

Question 1

Internal control

Answer 1

Defined by COSO as a process effected by those charged with governance with the purpose of providing reasonable assurance regarding achieving the objectives related to operations, reporting, and compliance.

Question 2

Understanding internal controls is important for

Answer 2

Auditing internal controls over financial reporting.
Making a preliminary assessment of control risk.

Question 3

Entity level controls

Answer 3

controls that exist at an organizational level, such as a strong tone at the top of the organization emphasizing the importance of internal control.

Question 4

Transaction level controls

Answer 4

controls designed to prevent, or detect and correct, misstatements in transactions and related account balances.

Question 5

Components of entity-level controls

Answer 5

Control environment
Risk Assessment Process
Control activities
information and communication
monitoring process

Question 6

Control environment

Answer 6

sets the tone of an entity and influences the control consciousness of its people.