Day 21

Question 1

List 5 components of Internal Control and the 17 principles

Answer 1

CRIME

Control Environment - EBOCA
Risk Assessment - SAFR
Information & Communication - OIE
Monitoring Activities - SOD
Existing Control Activities - CATP

MCQ-00382

Question 2

The use of an Integrated Framework to establish internal controls provides value to external stakeholders by?

Answer 2

• confidence that board is effectively overseeing internal controls
• a stronger understanding of an effective internal control system
• confidence that MGMT will eliminate inefficient controls

MCQ-00490

Question 3

When is disclosure required by SOX when an investor purchases how much stock?

Answer 3

10%

MCQ-00201

Question 4

True or False: an audit committee must have a financial expert to remain in existence

Answer 4

False

An audit committee SHOULD have at least one financial expert but it’s not required to remain in existence

To start an audit committee one financial expert needs to participate and must be disclosed

MCQ-00295

Question 5

Name the 5 professional associations that are part of the Committee of Sponsoring Organizations

Answer 5

1. AICPA
2. Institute of Internal Auditors
3. Institute of MGMT Accountants
4. Financial Executives Institute
5. American Accounting Association

MCQ-00466

Question 6

According to SOX the assertions on the FS that the CEO and CFO must make regarding internal controls:

Answer 6

1. Assurance that controls were setup to ensure material information is available
2. Convulsions as to the effectiveness of controls
3. Controls have been evaluated 90 days prior to report issuance

MCQ-00191

Question 7

The principals related to the risk assessment of Internal Control-Integrated Framework

Answer 7

• change identification and assessment
• consider potential fraud
• specification of objectives

MCQ-00392

Question 8

Strategic objectives are established as part of _____?

Answer 8

Enterprise Risk Mgmt

MCQ-00425

Question 9

Internal Control - Integrated Framework principal: policy and procedure deployment falls within _____?

Answer 9

(Existing) Control Activities

MCQ-00502

Question 10

What does the COSO Cube illustrate?

Answer 10

• 3 categories of Objectives as columns
• 5 Internal Control components as rows
• 4 levels of an Entity’s Organization in the 3rd dimension

MCQ-00373

Question 11

Communicating internal control deficiencies to the responsible party who have the ability to correct them is part of what component?

Answer 11

Monitoring

MCQ-00431

Question 12

Define: Inherent risk

Answer 12

The risk too the entity without MGMT interference to mitigate the risk

MCQ-15752

Question 13

For effective internal controls, all 5 Components and 17 Principles that are relevant must be _______ and ______?

Answer 13

- Present (Design) - Included in the design

- Functioning (Operating Effectively) - Operating as designed

MCQ-00382

Question 14

List the Principles of Control Environment
EBOCA

Answer 14

- Ethical values and integrity
- Board independence/oversight
- Organizational Structure
- Commitment to competence
- Accountability

MCQ-00382

Question 15

List the Principles of Risk Assessment
SAFR

Answer 15

- Specify objectives
- Identify and analyze Risks
- Fraud potential
- Assess changes

MCQ-00382

Question 16

List the Principles of Information & Communication
OIE

Answer 16

- Obtain and use info.
- Internally communicate info.
- Externally communicate info.

MCQ-00382

Question 17

List the Principles of Monitoring Activities
SOD

Answer 17

- Ongoing & Separate evaluations
- Communication of Deficiencies

MCQ-00382

Question 18

List the Principles of Existing Control Activities
CA T PP

Answer 18

• Select and develop Control Activities
• Select and develop Technology controls
• Deploy through Policies and Procedures

MCQ-00382

Question 19

Name the 3 Objectives of the COSO Cube
ORC

Answer 19

- Operations Objectives - effectiveness and efficiency & safeguard assets

- Reporting Objectives - reliability, timeliness, transparency of financial and nonfinancial info with external and internal entities (established by regulators)

- Compliance Objectives - ensure the entity is adhering to laws and regulations

MCQ-00382 - B1-5

Question 20

Equation: After-Tax Cost of Debt

Answer 20

= Pretax Cost of Debt × (1 − Tax Rate)

MCQ-03951

Question 21

Equation: Cost of Retained Earnings (CAPM)

Capital Asset Pricing Model

Answer 21

= Risk-Free Rate + Risk Premium
= Risk-Free Rate + (Beta × Market Risk Premium)
= Risk-Free Rate + [Beta × (Market Return − Risk-Free Rate)]

MCQ-03944