Internal Control

Question 1

What is the internal control system?

Answer 1

Internal control describes the process designed, implemented and maintained by those charged with governance, management and other personnel to provide them with reasonable assurance that an entity will achieve its objectives with regard to:

-The reliability of financial reporting (internal and external)
-The effectiveness with efficiency of operations and
Compliance with applicable laws and regulations

Question 2

Components of internal control:

Risk Assessment Process

Answer 2

How management identifies risk and decides upon actions to manage them.

Question 3

Components of internal control:

Information system

Answer 3

Consists of infrastructure, software, people, procedures and data.

Question 4

Components of internal control:

Control Activities

Answer 4

The policies and procedures that help ensure that management directive are carried out.

Question 5

Components of internal control:

Monitoring of controls

Answer 5

Assess the design and operation of controls over time. Ongoing monitoring is a part of regular management activity.

Question 6

Control Activities

Answer 6

Control activities include those activities designed to prevent, detect or correct errors.

Examples include:
•Authorization
•Segregation of duties
•Physical Controls
•Sequential Numbering
•Performance review

Question 7

Internal Controls In a computerized environment

Answer 7

The internal controls in a computerized environment include both manual procedures and procedure designed into computer programs.

The controls examinable are the following two categories:

• General Controls
• Application Controls