COSO - Internal Control

Question 1

What are the 5 components of an internal control system?

Answer 1

1. Control Environment
2. Risk Assessment
3. Control Activities
4. Monitoring
5. Information and Communication

Question 2

What are the objectives of COSO?

Answer 2

1. Operations objectives
2. Reporting objectives
3. Compliance objectives

Question 3

17 Principals of COSO

The organization needs to demonstrate a commitment to integrity and ethical values

Answer 3

Control Environment

Question 4

17 Principals of COSO

The board of directors demonstrates independence from management and exercises oversight of the development and performance of internal control

Answer 4

Control Environment

Question 5

17 Principles of COSO

Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities in pursuit of the objectives

Answer 5

Control Environment

Question 6

17 Principles of COSO

The organization demonstrates a commitment to attract, develop, and retain competent individuals in alignment with objectives

Answer 6

Control Environment

Question 7

17 Principles of COSO

The organization holds individuals accountable for their internal control responsibilities in pursuit of objectives

Answer 7

Control Environment

Question 8

17 Principles of COSO

The organization specifies objectives with sufficient clarity to enable the identification and assessment of risk relating to objectives

Answer 8

Risk Assessment Principles

Question 9

17 Principles of COSO

The organization identifies risks to the achievement of its objectives across the entity and analyzes risks as a basis for determining how the risks should be managed

Answer 9

Risk Assessment Principles

Question 10

17 Principles of COSO

The organization considers the potential for fraud that could impede the achievement of objectives

Answer 10

Risk Assessment Principles

Question 11

17 Principles of COSO

The organization identifies and assesses changes that could significantly impact the system of internal control

Answer 11

Risk Assessment Principles

Question 12

17 Principles of COSO

The organization selects and develops control activities that contribute to the mitigation of risks to the achievement of objectives to acceptable levels

Answer 12

Control Activities

Question 13

17 Principles of COSO

The organization selects and develops general control activities over technology to support the achievement of objectives

Answer 13

Control Activities

Question 14

17 Principles of COSO

The organization deploys control activities through policies that establish what is expected and procedures that put policies into action

Answer 14

Control Activities

Question 15

17 Principles of COSO

The organization obtains or generates and uses relevant, quality information to support the functioning of internal control

Answer 15

Information and Communication Principles

Question 16

17 Principles of COSO

The organization internally communicates information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control

Answer 16

Information and Communication Principles

Question 17

17 Principles of COSO

The organization communicates with external parties regarding matters affecting the functioning of internal control

Answer 17

Information and Communication Principles

Question 18

17 Principles of COSO

The organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning

Answer 18

Monitoring Activities

Question 19

17 Principles of COSO

The organization evaluates and communicates internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors, as appropriate

Answer 19

Monitoring Activities

Question 20

COSO definition of Internal Control

Answer 20

Internal control is a process—effected by the entity’s board of directors, management, and other personnel—designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
Effectiveness and efficiency of operations
Reliability of financial and nonfinancial reporting
Compliance with applicable laws and regulations

Question 21

What are the 5 principles of “Control Environment”

Answer 21

1. Integrity and ethical values
2. Board of directors demonstrates independence
3. Management establishes structures, reporting lines, and appropriate authorities and responsibilities in order to achieve objectives
4. Competence (attract, develop and retain competent individuals)
5. Accountability