M 1 MCQ Flashcards
- The articles of incorporation and bylaw of a corporation serve as a basis for the governance structure of a corporation which of the following items are normally included in the bylaws of the corporation as opposed to the articles of incorporation?
a. Purpose of the corporation
b. Number of authorize shares of stock
c. Procedure for electing directors
d. Powers of the corporation.
c. Procedure for electing directors
Because the procedure for electing directors is normally included in the bylaws.
A,b, and d are normally included in the article of incorporation.
- Which of the following is not a requirement of the Wall Street Reform and Consumer Protection (Dodd-Frank) Act for publicly held corporations registered with the SEC?
a. If it is decided that the CEO should also be appointed chairman of the board, the corporation must disclose why this decision was made.
b. The member if the compensation committee of the board must be independent.
c. Shareholders must be allowed a nonbinding vote on officer compensation at least every three years.
d. All members of the audit committee of the board must be financial experts.
d. All members of the audit committee of the board must be financial experts.
- Which of the following is most effective as an external monitoring device for a publicly held corporation than the others?
a. Internal auditors
b. External auditors
c. The SEC
d. Attorneys.
b. External auditors
internal auditors are internal monitoring device.
SEC relies upon external auditors to audit the corporation’s financial statements and internal controls
Attorneys only advise management on legal issues. They cannot take action if management does not take their advice.
- In setting priorities for internal audit activities, the chief audit executive should:
a. use a risk-based approach
b. use management’s priorities.
c. use an approach that cycles audit areas each year.
d. use a random approach to more likely detect fraud.
a. use a risk-based approach
because a risk-based approach is required.
B, c, and d are incorrect because they do not describe appropriate overall approaches to setting priorities.
- The Institute of Internal Auditor’s International Standards for the Professional Practice of Internal Auditing cover what two major types of internal auditing services?
a. Assurance and consulting
b. Financial and operational
c. Compliance and taxation
d. Audit and review
a. Assurance and consulting
- According to the International Standards for the Professional Practice of Internal Auditing
a. All internal audit seniors must be Certified Internal Auditors.
b. The internal auditors must establish and maintain a system to monitor the disposition of audit results.
c. Internal auditors must be assigned to assist the external auditors
d. Internal auditors must not have a financial interest in the company
b. The internal auditors must establish and maintain a system to monitor the disposition of audit results.
- Securities analysts act as one form of monitoring device from a corporate governance standpoint. What is a limitation that is often identified when considering the effectiveness of securities analysis in this regard?
a. Conflicts of interest.
b. Lack of competence
c. Use of only nonfinancial information for analyses.
d. They are employees of the company
a. Conflicts of interest.
Because occasionally the analyst’s firm has a vested interest in the welfare of the company.
Internal Control
- Which of the following components of internal control would encompass the routine controls over business processes and transactions?
a. The control environment.
b. Information and communication
c. Control activities
d. risk assessment
c. Control activities
Because control activities, policies and procedures are designed to assure that management’s directives are followed.
Control environment is high-level control
Information and communication encompass the controls to assure perform their functions.
Risk assessment encompasses the organization’s processes to identify, assess, and control risks.
- Which of the following is not a component in the COSO framework for internal control?
a. Control environment.
b. Segregation of duties
c. Risk assessment
d. Monitoring
b. Segregation of duties
Because segregation of duties is an aspect of control activities, which is the component
- Which of the following would generally be entitled to a reward for whistle-blowing under the Dodd-Frank Act?
a. An external auditor who discovers a violation while performing an audit of a company’s financial statement and internal control under SEC requirements
b. A customer of a company who discovers a violation in the course of doing business with the company.
c. A director of a company who discovers a violation while performing an audit of compliance.
d. An internal auditor of a company who discovers a violation while performing an audit of compliance.
b. A customer of a company who discovers a violation in the course of doing business with the company.
Because a customer would be entitled to receive a reward.
A, c, and d would not be eligible for a reward.
- Jarrett Corporation is considering establishing an enterprise risk management system. Which of the following is not a benefit of enterprise risk management?
a. Helps the organization seize opportunities
b. enhance risk response decision
c. improves the deployment of capital
d. Insures that the organization shares all major risks.
d. Insures that the organization shares all major risks.
Because sharing risk is only way of responding, and this technique cannot be used for all risks, nor should it be.
- Which of the following is not a technique for identifying events in an enterprise risk management program?
a. Process flow analysis.
b. Facilitated workshops.
c. Probabilistic models
d. Loss event data methodologies.
c. Probabilistic models
Because probabilistic models are sued for risk assessment.
A, b, and d are all method used for event identification.
