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Chapter 3 : INTERNAL CONTROL AND CONCEPTS

Total questions: 30

Worksheet time: 17mins

Name
Class
Date
1.
Which of the following components of internal control includes development and use of training policies that communicate prospective roles and responsibilities to employees?
a)
Monitoring
b)
Control Environment
c)
Risk Assessment
d)
Control Activities
2.
Proper segregation of duties will reduce the opportunities which allow persons to be in positions to both _____
a)
Journalize entries and prepare financial statements
b)
Record cash receipts and cash disbursements
c)
Establish internal control and authorize transactions
d)
Perpetrate and conceal errors and fraudulent acts
3.
Effective internal control calls for the separation of certain functions. Which of the following functions should be separated?
a)
Authorization, execution, and payment
b)
Authorization, recording, and custody
c)
Custody, execution, and reporting
d)
Authorization, payment, and recording
4.
Which of the following is an example of detective control?
a)
Fraud Awareness Training
b)
Surprise Audits
c)
Background Checks
d)
Data Matching
5.
Which of the following statements is TRUE regarding management's documentation of internal controls?
a)
The documentation supporting assessment must include the entire population of controls
b)
The use of policy manual is the only acceptable form of evidence
c)
Control documentation serves as a basis for management's assessment about ICFR
d)
The documentation provides definite support that the tests were properly performed
6.

COSO identified five interrelated components of internal control. Which of the following is NOT one of those five?

a)

risk assessment

b)

internal control policies

c)

monitoring

d)

information and communication

7.

Who must be involved in implementing control measures in a business?

a)

Only the owners.

b)

Everyone within the business.

c)

The third parties.

d)

The management of the business.

8.

In order to apply control, which process should not be followed?

a)

Analyse the shortcomings of the business.

b)

Analyse the strong points of the business.

c)

Not to act against shortcomings.

d)

Decide on short- and long-term objectives.This is a wrong answer

9.

Identify which item falls under 'control over fixed assets'.

a)

Debtors

b)

Creditors

c)

Equipment

d)

Petty cash

10.

All cash paid should be done by cheque, including petty cash payments.

a)

True

b)

False

11.

Define the term 'internal control'.

a)

Management activities to exercise authority in a business.

b)

Measures set by management to obtain maximum profit.

c)

Both answers 1 and 2.

12.

Who is responsible for the effective operation of internal controls?

a)

General Manager

b)

ICS Manager

c)

Operations Manager

d)

Unit Head

e)

All employees

13.
The principles of internal control include: 
a)
Maintain minimal records
b)
Separate recordkeeping from custody of assets
c)
Bond all employees
d)
Require automated sales systems
14.
A properly designed internal control system: 
a)
Lowers the company's risk of loss
b)
Insures profitable operations
c)
Eliminates the need for an audit
d)
Requires the use of non-computerized systems
15.
Two clerks sharing the same cash register is a violation of which internal control principle? 
a)
Insure assets
b)
Maintain adequate records
c)
Establish responsibilities
d)
Apply technological controls
16.
Which internal control principle prescribes the use of pre-numbered printed checks? 
a)
Technological controls
b)
Maintain adequate records
c)
Establish responsibilities
d)
Divide responsibility for related transactions
17.
The impact of technology on internal controls includes: 
a)
Elimination of the need for regular audits
b)
Elimination of fraud
c)
Elimination of separation of duties
d)
Reduced processing errors
18.
Cash equivalents: 
a)
Are short-term, highly liquid investment assets
b)
Include 6-month certificates of deposit
c)
Include checking accounts
d)
Are recorded in petty cash
19.
Preparing a bank reconciliation on a monthly basis is an example of: 
a)
Protecting assets by proving the accuracy of cash records
b)
Establishing responsibility
c)
Separation of duties
d)
Poor internal control
20.
The number of days' sales uncollected: 
a)
Is calculated by dividing accounts receivable by sales
b)
Is used to evaluate the liquidity of receivables
c)
Measures a company's debt to income
d)
Measures a company's ability to pay its bills on time
21.

For financial statement audits, auditors need to understand controls that are relevant to the audit in order to

a)

identify and assess the risks of material misstatements

b)

perform preliminary analytical procedures

c)

detect fraud

d)

assess inherent risk

22.

Narratives, flowcharts, and internal control questionnaires are three common methods of

a)

testing the internal controls

b)

designing the audit manual and procedures

c)

documenting the auditor's understanding of internal controls

d)

documenting the auditor's understanding of a client's organizational structure

23.

Walkthroughs combine observation, inspection, and inquiry to assure that the controls designed by management have been implemented.

a)

True

b)

False

24.

The employee in charge of authorizing credit to the company's customers does not fully understand the concept of credit risk. This lack of knowledge would

a)

constitute a deficiency of management

b)

constitute a deficiency in operation of internal controls

c)

constitute a deficiency in design of internal controls

d)

not constitute a deficiency

25.

These are typically those controls put in place after the detective internal controls discover a problem.

a)

Preventative

b)

Corrective

c)

Compensating

26.

A structure that a business uses to collect, store, manage, process, retrieve, and report its financial data so it can be used by accountants, consultants, business analysts, manager, chief financial officers, auditors, regulators and tax agencies.

a)

Planning

b)

Budget

c)

Accounting Information System

d)

Documentation

27.

These are controls put in place to avert a negative event from occuring.

a)

Preventative

b)

Detective

c)

Corrective

d)

Compensating

28.

Detective internal controls are the following, except:

a)

internal audits

b)

disciplinary action

c)

reviews

d)

reconciliations

29.

Policies and procedures help to protect a company from following internal threats, except:

a)

thefts

b)

embezzlement

c)

mismanagement of funds

d)

competition

30.

Corrective controls could include the following except:

a)

physical inventories

b)

reports filed

c)

software patches

d)

new policies

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