Chapter 8

Question 1

what is an internal control

Answer 1

something put in place to ensure you get the desired outcome/ meet your objectives

Question 2

inherant limitations of internal control

Answer 2

costs of control outweighing benefits

poor judgement

fraud

controls not being updated

unforeseen circumstances

Question 3

5 categories of COSO cube

Answer 3

control environment

risk assessment

control activities

information and communication

monitoring activities

Question 4

what is the control environement

Answer 4

culture, rules and structure of organisation

Question 5

what is the risk assessment

Answer 5

assessing likelihood and impact of risk

Question 6

what are the control activities

Answer 6

actions

Question 7

what is a prevent control

Answer 7

to prevent errors from happening

Question 8

what is a detect control

Answer 8

to detect errors once occurred

Question 9

what is a correct control

Answer 9

designed to minimise error

Question 10

what is a direct control

Answer 10

direct to a desired outcome such as evacuation policy and training

Question 11

what is a discretionary control

Answer 11

needs human decision

Question 12

what is a non discretionary control

Answer 12

based on rules / automatic

Question 13

acronym for control procedures

Answer 13

APIPS

Question 14

what does APIPS stand for

Answer 14

Authorisation
physical controls
information processing
performance reviews
segregation of duties

Question 15

acronym for good information

Answer 15

ACCURATE

Question 16

what does ACCURATE stand for

Answer 16

Accurate
Complete
Cost-beneficial
User-targeted
Relevant
Authoritative
Timely
Easy to use

Question 17

what is an annual review of controls

Answer 17

FRC states the board should conduct an annual review of internal controls, assessing any changes, the quality of the controls and any deficiencies

Question 18

advantages of audit committees

Answer 18

improves quality of financial reporting

creates climate of discipline and control

strengthens position of external auditors

helps FD- NED’s can advise them

Question 19

disadvantages of audit committees

Answer 19

not always clear what they’re doing as findings are not made public

the effectiveness can be compromised if they act as a barrier between external audit and the board

Question 20

6 responsibilities of audit committee

Answer 20

monitoring and reviewing

overseeing

policy setting

response to auditors

auditors request

whistleblowers