5/7/24 IC Understanding

Which of the following is a key objective of internal controls in financial reporting?

• Increasing market share

• Preventing fraud and errors

• Improving product quality

• Expanding business operations

How do internal controls contribute to corporate governance?

• By facilitating external audits

• By enhancing operational efficiency

• By ensuring management accountability

• By promoting employee benefits

Which element is crucial for effective internal controls in an organization?

• Regular team outings

• Strong leadership and oversight

• Flexible working hours

• Aggressive marketing strategies

How do internal controls assist in risk management?

• By identifying and mitigating risks proactively

• By increasing investment in technology

• By expanding into new markets

• By hiring more staff

Which component is essential for the effectiveness of internal controls in risk assessment?

• Comprehensive training programs

• Periodic performance reviews

• Advanced technological tools

• Detailed risk analysis procedures

How do internal controls support ethical business practices?

• By enforcing codes of conduct

• By increasing advertising efforts

• By enhancing product designs

• By expanding market reach

Segregation of duties is a fundamental principle in internal controls because it:

• Ensures that all employees are cross-trained
• Reduces the risk of errors and fraud
• Increases the workload for employees
• Facilitates micromanagement by supervisors

Authorization in internal controls refers to:

• Assigning specific tasks to employees
• Obtaining permission before performing certain activities
• Conducting background checks on employees
• Providing incentives for achieving targets

Which of the following is an example of a preventive control?

• Security cameras
• Fraud hotline
• Management review
• Internal audit

The concept of "tone at the top" refers to:

• The influence of senior management on the organizational culture
• The physical location of the executive offices
• The volume of communication from top management
• The number of employees reporting directly to top executives