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WorksheetsCHAP8: Intro to Internal Control & Internal Control Systems
Total questions: 20
Worksheet time: 10mins
Which of the following BEST defines internal control?
A. A rigid system that ensures perfect accuracy in operations
B. A process effected by people to achieve objectives with reasonable assurance
C. A checklist of rules imposed by management
D. A policy that eliminates all risks in reporting and compliance
One of the benefits of internal control is that it:
A. Guarantees no losses will occur
B. Helps an organization achieve reliable reporting and compliance with laws
C. Removes the need for management supervision
D. Eliminates all possible errors in operations
Which of the following is a limitation of internal control?
A. It is adaptable to any entity structure
B. It completely prevents fraud when properly designed
C. It may break down due to human error or carelessness
D. It always ensures compliance with regulations
Why is it important to weigh the costs of internal control against its benefits?
A. Because controls should always be as expensive as possible to be effective
B. Because excessive controls may outweigh the value they provide
C. Because costs do not matter if the controls prevent risks
D. Because controls eliminate judgment errors entirely
Which of the following is NOT a classification of internal controls?
A. Mandatory or voluntary
B. Manual or automated
C. Preventive or detective
D. Financial or non-financial
Discretionary internal controls are BEST defined as:
A. Controls required by law or regulation
B. Controls applied only through automation
C. Controls implemented at management’s option or judgment
D. Controls that ensure segregation of duties
Which element of a sound system of internal control focuses on ensuring only qualified, honest, and competent individuals are employed?
A. Arithmetical and accounting controls
B. Authorization and approval controls
C. Personnel/human resources controls
D. Management controls
Which of the following is NOT one of the five interrelated components of internal control identified by COSO?
A. Control environment
B. Risk assessment
C. Control activities
D. Strategic planning
Which aspect of the control environment ensures that employees are skilled, trained, and capable of performing their roles ethically and effectively?
A. Organizational structure
B. Commitment to competence
C. Human resource policies and practices
D. Assignment of authority and responsibility
What is the main role of an active and involved board of directors and audit committee in the control environment?
A. To hire employees and provide training
B. To oversee management decisions and enforce accountability
C. To define the company’s organizational hierarchy
D. To create HR policies and practices
Which aspect focuses on clearly defining roles, responsibilities, and decision-making powers so employees know what they are accountable for?
A. Organizational structure
B. Assignment of authority and responsibility
C. Human resource policies and practices
D. Commitment to competence
An organizational structure that separates duties between finance, compliance, and operations helps strengthen internal control by:
A. Improving efficiency in production
B. Ensuring proper segregation of duties and oversight
C. Reducing training costs for employees
D. Rewarding employees with bonuses
Which of the following is the FIRST step in the risk assessment process?
A. Prioritizing risks
B. Setting objectives
C. Implementing control activities
D. Monitoring activities
Risk assessment includes evaluating risks related to which three major categories of objectives?
A. Operations, reporting, and compliance
B. Finance, marketing, and sales
C. Customers, employees, and suppliers
D. Planning, organizing, and controlling
After risks are identified and assessed, what comes next?
A. Setting objectives
b. Conducting top-level reviews
C. Approving transactions
D. Prioritizing risks
Which of the following BEST describes a “top-level review” as a control activity?
A. Day-to-day supervision by line managers
B. Automating financial reports for efficiency
C. Checking the accuracy of individual transactions
D. Oversight by senior management of overall organizational performance
Which of the following best describes Segregation of Duties?
A. Assets are locked or guarded and periodically counted.
B. Duties are divided among different people to reduce errors or fraud
C. Information must be identified, captured, and communicated in a timely manner.
D. Performance indicators analyze operational and financial data.
Which of the following is NOT one of the listed qualities of good information?
A. Accessible
B. Correct
C. Profitability
D. Timely
Which of the following best describes the purpose of monitoring in internal control systems?
A. To assign blame when something goes wrong
B. To determine whether the system of internal control continues to be relevant and is able to address new risks
C. To reduce the workload of internal auditors
D. To eliminate the need for separate evaluations
What is the role of documentation in an internal control system, especially in large organizations?
A. It adds unnecessary complexity to internal controls
B. It replaces the need for evaluations
C. It can make an evaluation more efficient and help employees understand their role
D. It is only used during audits
