NEW
Font size
WorksheetsGovernnn
Total questions: 40
Worksheet time: 20mins
In a small company that employs inadequate number of employees to permit proper division of responsibilities, effective internal control can be strengthened by
Direct participation by the owner of the business in the record keeping activities of the business.
Delegation of full clear-cut responsibility to each employee for the functions assigned to each.
Affirm in writing management’s approval of limitation on the scope of the audit.
Employment of temporary personnel to aid in the separation of duties.
The major issue embedded in the structure of modern corporations that has contributed to the corporate governance problem has been
Excessive executive compensation.
The separation of ownership from control.
Union domination of the proxy machinery.
Early retirement programs, such as the one implemented by IBM.
All of the following are primary objectives of the overall management process except:
Compliance with laws, regulations, ethical and business norms and contracts.
Identification of risk exposures and use of effective strategies to control them.
Improving the effectiveness of risk management, control and governance processes.
Safeguarding of the organization’s assets.
According to the COSO report, which of the following is the most important component of internal control?
Risk assessment.
Control activities.
Control environment.
Monitoring.
This type of control ensures that there is clear direction and drive towards achieving the stated objectives.
Directive
Detective
Preventive
Corrective
Which of the following best identifies the reason that effective corporate governance is important?The goal of profit maximization.
The goal of profit maximization.
Lack of oversight by the board of directors.
Excess management compensation.
The separation of ownership from management.
Internal control is a function of management, and effective control is based upon the concept of charge and discharge of responsibility and duty. Which of the following is one of the overriding principles of internal control?
Responsibility for the performance of each duty must be fixed.
Responsibility for accounting and financial duties should be assigned to one responsible officer.
Responsibility for the accounting duties must be done by the audit committee of the company.
Responsibility for accounting activities and duties must be assigned only to employees who are bonded.
Which of the following is not a component in the COSO framework for internal control?
Segregation of duties
Control environment
Risk assessment
Monitoring
The purpose of control is to
Determined whether an operation is a cost or profit center.
Determine who is in charge of a department.
Control employee behavior.
Ensure that the goals of a firm are being achieved.
Internal control structure objectives are to be accomplished with reasonable assurance. The concept of reasonable assurance recognizes that
Judgmentally selected samples cannot meet the criteria for statistical validity.
Employee carelessness can weaken an internal control structure.
The control procedure should not have a significant adverse effect on efficiency or profitability.
The auditor’s primary responsibility is the detection of fraud.
Which of the following is not a proper role of corporate board of directors?
Guidance
Governance
Guarantor
Guardian
Corporate management has a role in the maintenance of internal control. In fact, management sometimes is a control. Which of the following involves managerial functions as a control device?
Supervision of employees.
Maintenance of a quality control department.
Use of a corporate policies manual.
Internal auditing.
Which of the following is not one of the differences between a CEO and a Chairman of the Board?
Only the secretary and the CEO report directly to the Chairman, while all executive managers report directly to the CEO.
The CEO is usually full-time, while the Chairman is usually part-time.
The CEO is the head of the executive team, while the Chairman is the leader of the board.
The Chairman implements the decisions of the board, while the CEO proposes plans, budgets and strategies.
Corporate governance is concerned with
Hostile takeovers becoming the norm.
The legitimacy of charters used in a place.
The trend toward more women on boards of directors.
The relative roles, rights, and accountability of such stakeholder groups as owners, board
members, managers, employees, and others.
An adequate system of internal control is most likely to detect an irregularity perpetrated by a
Single employee
Single manager
Group of employees in collusion
Group of employees in collusion
The following relates to internal control. Which of the following is incorrect?
The internal control system is confined to those matters which relate directly to the functions of the accounting system.
Internal control system refers to all the policies and procedures adopted by the management of an entity to assist in achieving management’s objectives.
In the audit of financial statements in accordance with GAAP, the external auditor is only concerned with those policies and procedures within the accounting and internal control system that are relevant to the financial statements.
A strong environment does not, by itself, ensure the effectiveness of the internal control system.
The concept of control should be viewed as
Inhibiting a person.
Limiting an operation.
Accomplishing an objective
Blocking a process.
A manager has an interest in receiving benefits from his or her position as a manager. This is a scenario of the agency conflict under:
Moral hazard
Risk aversion
Earnings retention
Effort level
This is a concept of good governance that means directors are able to make judgments and give opinions that are in the best interests of the company, without bias or pre-conceived ideas.
Fairness
Honesty and integrity
Openness and transparency
Independence
This committee is tasked monitor financial reporting.
Audit committee
Risk committee
Nominations committee
Remuneration committee
This COSO component include a range of actions as diverse as approvals, authorizations, verifications, reconciliations, etc
Control Environment
Control Activities
Risk Assessment
Monitoring
Corporate directors, management, external auditors and internal auditors all play important roles in creating a proper control environment. Top management is primarily responsible for
Establishing a proper environment and specifying an overall internal control structure.
Ensuring that external and internal auditors adequately monitor the control environment.
Reviewing the reliability and integrity of financial information and the means used to collect and report such information.
Implementing and monitoring controls designed by the board of directors.
Giving limited computer access to employees is an example of what type of control?
Corrective and Directive
Directive and Preventive
Directive and Corrective
Preventive and Detective
The primary responsibility for establishing and maintaining internal controls rests with the
External Auditors
Management
Internal Auditors
Securities and Exchange Commission
An act of two or more employees to misstate record is called
Defalcation
Felony
Malfeasance
Collusion
The board of directors should (choose the incorrect one):
Understand its role and responsibilities.
Provide suitable leadership to the company.
Fulfill its role and responsibilities.
Make business decisions for the company.
Which of the following is not considered an external stakeholder?
Auditors
Regulators
Shareholders
Lenders
Proper segregation of functional responsibilities in an effective structure of internal control calls for separation of the functions of
Authorization, payment and recording
Custody, execution and reporting
Authorization, execution and payment
Authorization, recording and custody
This pertains to the cost of measuring, observing and controlling the behavior of management.
Training cost
Monitoring cost
Residual Loss
Bonding Cost
Inherent limitations in an internal control structure must be considered in evaluating its effectiveness in preventing or detecting errors and irregularities. Inherent limitations do not include
Misunderstanding of instructions, mistakes of judgment, personal carelessness, distraction or fatigue.
Incompatible functions performed by the same person.
Collusion among employees
Management override of certain policies and procedures.
Which of the following is not typically one of management’s concerns in designing an effective internal control structure?
Obtaining the best internal control system possible.
Efficiency and effectiveness of operations.
Reliability of financial reporting.
Compliance with applicable laws and regulations.
According to the COSO report, the correct sequence is
Objectives, actions, risks.
Risks, objectives, actions.
Actions, objectives, risks.
Objectives, risks, actions.
The requirement that purchases be made from suppliers on an approved vendor list is an example of a
Monitoring Control
Detective Control
Corrective Control
Preventive Control
Which of the following is a directive control?
Requiring dual signatures on all disbursements over a specific dollar amount.
Requiring all members of the internal auditing department to be CIAs.
Recording every transaction on the day it occurs.
Performing monthly reconciliation of bank statements.
A well-designed system of internal control that is functioning effectively is most likely to detect an irregularity arising from
The fraudulent action of several employees.
Management fraud.
The fraudulent action of an individual employee.
Informal deviations from the official organization chart.
Proper segregation of duties reduces the opportunities in which a person could both
Record cash receipt and record cash disbursements.
Establish internal controls and authorize transactions.
Perpetuate errors and irregularities and conceal them.
Journalize entries and prepare financial statements.
What is the primary purpose of effective internal control in an organization?
Obtaining profitability and financial strength.
Achievement of certain organizational goals.
Shareholders’ involvement in the company’s success.
Completion of a successful audit for the entity.
Checking odd balances in the documents and in the financial statement accounts is an example of what type of control?
Corrective
Directive
Detective
Preventive
Which of the following components of internal control would encompass the routine controls over business processes and transactions?
Risk Assessment
The Control Environment
Control Activities
Information and Communication
I. The governance function is the primary responsibility of the internal audit activity.
II. The organization should employ a process for identifying, assessing and managing risk.
T;T
T;F
F;T
F;F
