PSMS Exercise 1.2

For internal control activities to be effective, it has to be cost-effective; function consistently according to plan throughout the period; comprehensive, reasonable, and directly related to the control objective; and ___________.

• Appropriate

• Reconciled

• Verified

• Reviewed

How many interrelated components does internal control have?

• 6

• 4

• 5

• 7

Documentation involves preserving evidence to substantiate a decision, event, transaction, or system.

• True
• False

________ sets the tone of an agency, influencing the control consciousness of its staff. It is the foundation for all the other components of internal control, providing discipline and structure.

• Control environment

• Control activities

• Risk assessment

• Monitoring

One of the principles of internal control activities is that management should consider human capital as an asset rather than costs.

• True
• False

The policies and procedures established to address risks and to achieve the agency’s objectives.

• Control environment

• Control activities

• Risk assessment

• Monitoring

Risk assessment is the process of identifying and analyzing relevant risks to the achievement of the agency’s objectives, and determining the appropriate response to the risks.

• True
• False

 A component of internal control that deals with a process that assesses the quality of the internal control system’s performance over time.

• Monitoring

• Control activities

• Control environment

• Information and communication

A principle of control activities in which operating performance is reviewed against a set of standards regularly, assessing effectiveness and efficiency.

• Top level reviews of actual performance

• Verifications

• Reviews of operating performance

• Authorizations

Information and communication is the process that assesses the quality of the internal control system’s performance over time.

• True
• False