INAC Chapter 3

Question 1

What is the control activities Numonic?

Answer 1

SPAMSOAP

Question 2

What does SPAMSOAP stand for?

Answer 2

-Supervision
-Personnel
-Arithmetical and Accounting
-Management
-Segregation of duties
-Organisation
-Authorisation and approval
-Physical controls

Question 3

What is Monitoring of controls ?

Answer 3

This is assessing the effectiveness of controls, either on a one off basis or regularly

Question 4

What are 4 Limitations of controls?

Answer 4

-Human error
- Unusual Transactions
-Collusion
- Small companies

Question 5

What are the two types of tests used by Auditors?

Answer 5

-Compliance tests
-Substantive tests

Question 6

What is a compliance test used by auditors?

Answer 6

This is a test used to see if the controls are functioning adequately

Question 7

What is a substantive test used by auditors?

Answer 7

This is a test of the transactions, account balances and the existence of assets/liabilities and their valuation

Question 8

What is an internal control questionnaire ?

Answer 8

This is a checklist designed to discover the existence on internal controls and identify areas of weakness

Question 9

What are 5 Objectives within the sales system?

Answer 9

-Goods supplied to customers who pay on time
-Orders dispatched quickly and in full
-Only valid sales recorded
-All sales/receivables recorded
-Revenue is recorded in the period it relates to

Question 10

What are 4 objectives within the purchasing system?

Answer 10

-All purchases appropriately priced / quality
-Only valid goods/services are purchased
- All purchases are recorded
- Expenditure is recorded in the period that it relates to

Question 11

What are two supervisory controls?

Answer 11

-Segregation of duties
-Supervision

Question 12

What are the five components of internal control?

Answer 12

-The control environment
-Entity risk assessment process
-The information system
- Control Activities
-Monitoring of controls

Question 13

What is standing data ?

Answer 13

Standing data is information held on file that does not changeoften but must be kept up to date and ammendments to id require authorisation

Question 14

What is the control environment?

Answer 14

The control environment includes the governance and management function of an organisation

Question 15

What is the entities risk assessment process?

Answer 15

The risk assessment process forms the basis for how management determines the business risks to be managed

Question 16

What is the information system ?

Answer 16

The information system is all of the businesses processes relevant to financial reporting and communication

Question 17

What is Segregation of duties?

Answer 17

Not one person can fully record a transaction

Question 18

What are physical controls?

Answer 18

This is the looking after assets such as keeping cash locked in a safe

Question 19

What is Authorisation and approval?

Answer 19

All transactions require authorisation or approval by a responsible person e.g manager signing off a traniees timesheet

Question 20

What is management?

Answer 20

these are controls carried out by management on a day to day basis

Question 21

What is supervision?

Answer 21

Supervision is an important control as managers should supervise trainees

Question 22

What is organisation ?

Answer 22

The must be a well defined organisational structure showing how responsibility and authorisation are delegated

Question 23

What is arithmetical and accounting?

Answer 23

This would be the control of checking account balances, reconciliations etc

Question 24

What is personnel?

Answer 24

This would be staff and for example performing back ground checks before hiring someone