Corporate Governance

Question 1

which fundamental component of internal control: establishing ongoing and periodic evaluations, and addressing control deficiencies to operate effectively

Answer 1

monitoring

Question 2

which fundamental component of internal control: establishing integrity and ethical values in the organizational culture.
Management’s philosophy toward controls, organizational structure, system of authority and responsibility, personnel practices, policies, and procedures.

Answer 2

control environment

Question 3

which fundamental component of internal control: change management, organizational objectives, assessment, fraud

The process of identifying, analyzing, and managing the risks involved in achieving the organization’s objectives.

Answer 3

risk assessment

Question 4

what control is an access control software

Answer 4

preventive control

Question 5

what control is an echo check

Answer 5

detective

Question 6

most likely to be responsible for determining system access.

Answer 6

support functions

Question 7

According to the COSO internal control framework, if an organization outsources certain activities within the business to an outside party

Answer 7

Activities of an organization may be outsourced, but the responsibilities never transfer to the outsourced party. Management is never relieved of ultimate responsibility or accountability for internal control.

Question 8

A control that accomplishes the same objective as another control

Answer 8

compensating control

Question 9

evaluating internal control procedures should be the responsibility of

Answer 9

Internal audit staff who report to the board of directors.

Question 10

The COSO model has 5 control objectives, and the COSO ERM model has 8.

Answer 10

.

Question 11

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

Answer 11

COSO ERM

Question 12

Public company audit committees must contain

Answer 12

financial expert

Question 13

responsibility for determining system access

Answer 13

support functions

Question 14

Four key roles and responsibilities for internal control are

Answer 14

BOD, management, support, internal auditors

Question 15

BOD responsibility

Answer 15

oversight of key internal control activities and the organization’s enterprise-wide risk management.

Question 16

Management responsibility

Answer 16

maintaining effective internal controls related to daily operations.

Question 17

Support (business-enabling) functions responsibility

Answer 17

legal, compliance, finance, human resources, IT, and others. Support functions clarify internal control requirements and evaluate control-related compliance with set standards.

Question 18

Internal auditors responsibility

Answer 18

assess and report on internal control and provide recommendations to correct or improve activities

Question 19

Limitations of internal control

Answer 19

Management, human judgement, management override, collusion

Question 20

Types of internal control deficiencies

Answer 20

control deficiency, significant deficiency, material weakness

Question 21

control deficiency is

Answer 21

reduces the likelihood of an entity achieving its objectives (least serious)

Question 22

significant deficiency is

Answer 22

more serious than a control deficiency but less severe than a material weakness, yet it is important enough to merit attention by those charged with governance.

Question 23

material weakness is

Answer 23

reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis.

Question 24

categories of controls include

Answer 24

preventive, detective, and corrective

Question 25

feedback controls are

Answer 25

Evaluate the results of a process and, if the results are undesirable, adjust the process to correct the results; most detective controls are also feedback controls.

Question 26

feed forward controls are

Answer 26

Project future results based on current and past information and, if the future results are undesirable, change the inputs to the system to prevent the outcome

Question 27

general controls are

Answer 27

controls over the environment as a whole. They apply to all functions, not just specific accounting applications. General controls help ensure that data integrity is maintained.
Examples of general controls include restricting physical access to computer resources, production and storage of backup files, and performing background checks of computer services personnel.

Question 28

application controls are

Answer 28

controls over specific data input, data processing, and data output activities. Application controls are designed to ensure the accuracy, completeness, and validity of transaction processing. As such, they have a relatively narrow focus on those accounting applications that are involved with data entry, updates, and reporting.
Examples of application controls include checks to ensure that input data is complete and properly formatted (e.g., dates, dollar amounts), that account numbers are valid, and that values are reasonable (e.g., that we don’t sell quantities that are greater than the quantity currently in inventory). TRANSACTION controls

Question 29

Control environment 5 principles

Answer 29

integrity/ethical values, BOD independence of management/oversight, responsibility can never be outsourced, competence, accountability.

Question 30

Risk assessment 4 principles

Answer 30

objectives, assessment, fraud, change management

Question 31

Control activities 3 principles

Answer 31

risk reduction, technology controls, policies

Question 32

Information and communication 3 principles

Answer 32

quality, internal, external

Question 33

Monitoring activities 2 principles

Answer 33

ongoing/periodic evaluations, address deficiencies