Question 1

The internal control framework developed by COSO includes five so-called "components" of internal control.Discuss each of these five components.

Accepted Answer

Five components of internal control are:

Question 2

A database management system

Accepted Answer

A) allows clients to create databases that include information that can be shared across multiple applications. 
B) stores data on different files for different purposes,but always knows where they are and how to retrieve them. 
C) allows quick retrieval of data,but at a cost of inefficient use of file space. 
D) allows quick retrieval of data,but it needs to update files continually. 
A) allows clients to create databases that include information that can be shared across multiple applications. 
B) stores data on different files for different purposes,but always knows where they are and how to retrieve them. 
C) allows quick retrieval of data,but at a cost of inefficient use of file space. 
D) allows quick retrieval of data,but it needs to update files continually.

Question 3

Controls which are built in by the manufacturer to detect equipment failure are called

Accepted Answer

A) input controls. 
B) data integrity controls. 
C) hardware controls. 
D) manufacturer's controls. 
A) input controls. 
B) data integrity controls. 
C) hardware controls. 
D) manufacturer's controls.

Question 4

Which of the following is a risk assessment principle?

Accepted Answer

A) accountability 
B) use relevant,quality information to support the functioning of internal controls 
C) consider the potential for fraud 
D) develop general controls over technology 
A) accountability 
B) use relevant,quality information to support the functioning of internal controls 
C) consider the potential for fraud 
D) develop general controls over technology

Question 5

Controls that relate to a specific use of the IT system,such as the processing of sales or cash receipts,are called application controls.

Accepted Answer

A) True 
 B)False

Question 6

Proper segregation of functional responsibilities calls for separation of

Accepted Answer

A) authorization,execution,and payment. 
B) authorization,recording,and custody. 
C) custody,execution,and reporting. 
D) authorization,payment,and recording. 
A) authorization,execution,and payment. 
B) authorization,recording,and custody. 
C) custody,execution,and reporting. 
D) authorization,payment,and recording.

Question 7

When purchasing software or developing in-house software,

Accepted Answer

A) cost should be the only factor. 
B) extensive testing of the software is generally not required. 
C) a team of both IT and non-IT personnel should be involved in the decision process. 
D) the librarian and the IT manager should be the only ones involved in the decision process. 
A) cost should be the only factor. 
B) extensive testing of the software is generally not required. 
C) a team of both IT and non-IT personnel should be involved in the decision process. 
D) the librarian and the IT manager should be the only ones involved in the decision process.

Question 8

When a company designs and implements internal controls,cost of the controls is not a valid consideration.

Accepted Answer

A) True 
 B)False

Question 9

Backup and contingency plans should also identify alternative hardware that can be used to process company data.

Accepted Answer

A) True 
 B)False

Question 10

Processing controls include the following tests:
Validation
Sequence
Data Reasonableness
Completeness
Describe what each control is designed to do:

Accepted Answer

Validation: ensures that a particular ty

Question 11

Which of the following is not one of the three primary objectives of effective internal control?

Accepted Answer

A) reliability of financial reporting 
B) efficiency and effectiveness of operations 
C) compliance with laws and regulations 
D) assurance of elimination of business risk 
A) reliability of financial reporting 
B) efficiency and effectiveness of operations 
C) compliance with laws and regulations 
D) assurance of elimination of business risk

Question 12

Which of the following is not an underlying principle related to risk assessment?

Accepted Answer

A) The organization should have clear objectives in order to be able to identify and assess the risks relating to the objectives. 
B) The auditors should determine how the company's risks should be managed. 
C) The organization should consider the potential for fraudulent behavior. 
D) The organization should monitor changes that could impact internal controls. 
A) The organization should have clear objectives in order to be able to identify and assess the risks relating to the objectives. 
B) The auditors should determine how the company's risks should be managed. 
C) The organization should consider the potential for fraudulent behavior. 
D) The organization should monitor changes that could impact internal controls.

Question 13

An auditor should consider two key issues when obtaining an understanding of a client's internal controls.These issues are

Accepted Answer

A) the effectiveness and efficiency of the controls. 
B) the frequency and effectiveness of the controls. 
C) the design and operating effectiveness of the controls. 
D) the implementation and operating effectiveness of the controls. 
A) the effectiveness and efficiency of the controls. 
B) the frequency and effectiveness of the controls. 
C) the design and operating effectiveness of the controls. 
D) the implementation and operating effectiveness of the controls.

Question 14

Which of the following is an accurate statement regarding control activities?

Accepted Answer

A) As the level of complexity of IT systems increases,the separation of duties often becomes blurred. 
B) Segregation of duties would be violated if the same person authorizes the payment of a vendor's invoice and also approves the disbursement of funds to pay the bill. 
C) The most important type of protective measure for safeguarding assets and records is the us of physical precautions. 
D) all of the above 
A) As the level of complexity of IT systems increases,the separation of duties often becomes blurred. 
B) Segregation of duties would be violated if the same person authorizes the payment of a vendor's invoice and also approves the disbursement of funds to pay the bill. 
C) The most important type of protective measure for safeguarding assets and records is the us of physical precautions. 
D) all of the above

Question 15

When management is evaluating the design of internal control,management evaluates whether the control can do which of the following?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

A ________ is responsible for controlling the use of computer programs,transaction files and other computer records and documentation and releases them to the operators only when authorized.

Accepted Answer

A) software engineer 
B) chief computer operator 
C) librarian 
D) data control operator 
A) software engineer 
B) chief computer operator 
C) librarian 
D) data control operator

Question 17

Which of the following controls prevent and detect errors while transaction data are processed?

Accepted Answer

A) software 
B) application 
C) processing 
D) transaction 
A) software 
B) application 
C) processing 
D) transaction

Question 18

Parallel testing is used when old and new systems are operated simultaneously in all locations.

Accepted Answer

A) True 
 B)False

Question 19

Internal controls are not designed to provide reasonable assurance that

Accepted Answer

A) all frauds will be detected. 
B) transactions are executed in accordance with management's authorization. 
C) the company's resources are used efficiently and effectively. 
D) company personnel comply with applicable rules and regulations. 
A) all frauds will be detected. 
B) transactions are executed in accordance with management's authorization. 
C) the company's resources are used efficiently and effectively. 
D) company personnel comply with applicable rules and regulations.

Question 20

The most important output control is

Accepted Answer

A) distribution control,which assures that only authorized personnel receive the reports generated by the system. 
B) review of data for reasonableness by someone who knows what the output should look like. 
C) control totals,which are used to verify that the computer's results are correct. 
D) logic tests,which verify that no mistakes were made in processing. 
A) distribution control,which assures that only authorized personnel receive the reports generated by the system. 
B) review of data for reasonableness by someone who knows what the output should look like. 
C) control totals,which are used to verify that the computer's results are correct. 
D) logic tests,which verify that no mistakes were made in processing.

Exam 11: Internal Control and Coso Framework

The internal control framework developed by COSO includes five so-called "components" of internal control.Discuss each of these five components.

A database management system

Controls which are built in by the manufacturer to detect equipment failure are called

Which of the following is a risk assessment principle?

Controls that relate to a specific use of the IT system,such as the processing of sales or cash receipts,are called application controls.

Proper segregation of functional responsibilities calls for separation of

When purchasing software or developing in-house software,

When a company designs and implements internal controls,cost of the controls is not a valid consideration.

Backup and contingency plans should also identify alternative hardware that can be used to process company data.

Processing controls include the following tests: Validation Sequence Data Reasonableness Completeness Describe what each control is designed to do:

Which of the following is not one of the three primary objectives of effective internal control?

Which of the following is not an underlying principle related to risk assessment?

An auditor should consider two key issues when obtaining an understanding of a client's internal controls.These issues are

Which of the following is an accurate statement regarding control activities?

When management is evaluating the design of internal control,management evaluates whether the control can do which of the following?

A ________ is responsible for controlling the use of computer programs,transaction files and other computer records and documentation and releases them to the operators only when authorized.

Which of the following controls prevent and detect errors while transaction data are processed?

Parallel testing is used when old and new systems are operated simultaneously in all locations.

Internal controls are not designed to provide reasonable assurance that

The most important output control is

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Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

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Completing the Tests in the Acquisition and Payment Cycle:

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Completing the Audit

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