Internal Control Evaluation

Question 1

What are the 2 types of controls?

Answer 1

Preventative controls
Detective controls

Question 2

What should internal controls aim to do?

Answer 2

Achieve an assertion about a class of transaction, account balance or presentation and disclosure.

Question 3

What are the 5 components of internal control?

Answer 3

Control environment
Risk assessment
Control activities
Information and communication
Monitoring

Question 4

What are the 3 main ovjectives of internal control?

Answer 4

Operations
Reporting
Compliance

Question 5

What 6 things must be documented when recording an internal control?

Answer 5

Description of the control
Who performs the control
When and how often it is performed
Control activity details
Information from the control
Who monitors the control

Question 6

What are the 3 inherent limitations of controls?

Answer 6

Human error may occur
Controls can be circumvented by collusion or override
Management may make misjudgments on controls and risks

Question 7

What are the 3 techniques used to evaluate internal control systems?

Answer 7

Internal control questionnaires (ICQ)
Internal control evaluation questionnaires (ICEQ)
Checklists