W40-Internal Control

Question 1

Q30. Which of the following COSO categories of objectives includes safeguarding of assets? a. Operations b. Reporting c. Compliance d. Financing

Answer 1

Q30. (a) safeguarding assets is included in the operations objective

Question 2

Q31. Which of the following is not a principle related to the component of the control environment? a. Demonstrate a commitment to integrity and ethical values b. Demonstrate a commitment to attract, develop and retain competent individuals c. Identify and assess changes that could significantly impact the system of internal control d. Hold individuals accountable for their internal control responsibilities

Answer 2

Q31. (c) identify and assess changes that could significantly impact the system of internal control is a principle of the risk assessment

Question 3

Q33. According to the COSO framework, evaluators that monitor controls within an organization should have which of the following sets of characteristics? a. Competence and objectivity b. Respect and judgment c. Judgment and objectivity d. Authority and responsibility

Answer 3

Q33. (a) the evaluator must have competence and objectivity

Question 4

Q35. According to COSO, the use of ongoing and separate evaluations to establish a new baseline after changes have been made can best be accomplished in which of the following stages of the monitoring-for-change continuum? a. Control baseline b. Change identification c. Change management d. Control re-validation / update

Answer 4

Q35. (c) the change management stage involves evaluating the design and implementation of changes and establishing a new baseline. Answer (a) is incorrect because control baseline involves developing the initial understanding of the control system. Answer (b) is incorrect because change identification involves identifying necessary changes. Answer (d) is incorrect because control re-validation / update involves re-validating the understanding periodically.

Question 5

Q38. Which of the following components of internal control would encompass the routine controls over business processes and transaction? a. The control environment b. Information and communication c. Control activities d. Risk assessment

Answer 5

Q38. (c) control activities, policies and procedures are designed to assure that management’s directives are followed.

Question 6

Q40. Management of Johnson Company is considering implementing technology to improve the monitoring component of internal control. Which of the following best describes how technology may be effective at improving monitoring? a. Technology can identify conditions and circumstances that indicate that controls have failed or risks are present b. Technology can assure that items are processed accurately c. Technology can provide information more quickly d. Technology can control access to terminals and data

Answer 6

Q40. (a) monitoring involves collecting information to determine that controls are working

Question 7

Q41. Which of the following is not a limitation of internal control? a. Human judgment in decision-making may be faulty b. External forces may attack the system c. Management may override internal control d. Controls may be circumvented by collusion

Answer 7

Q41. (b) this is a business risk; it is not a limitation of internal control

Question 8

Q42. Which of the following is not required to be included in management’s report on internal control required under Section 404 of the Sarbanes-Oxley Act? a. A statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting b. A statement indicating that the board of directors has approved the system of internal control over financial reporting c. A statement identifying the framework used to assess internal control over financial reporting d. An assessment of the effectiveness of the corporation’s internal control over financial reporting

Answer 8

Q42. (b) a statement of the board of directors’ approval of the system is not required

Question 9

Q43. 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 her duties as a director d. An internal auditor of a company who discovers a violation while performing an audit of compliance

Answer 9

Q43. (b) a customer would be entitled to receive a reward