chapter 10

Question 1

According to COSO, which of the following components of the enterprise risk management addresses an entity’s integrity and ethical values

Answer 1

Internal environment

Question 2

Which of the following items is one of the eight components of COSO’s enterprise risk management framework

Answer 2

Monitoring

Question 3

In a large public corporation, evaluating internal control procedures should be responsibility of

Answer 3

internal audit staff who report to the board of directors

Question 4

Which of the following represents an inherent limitation of internal controls?

Answer 4

the CEO can request a check with no purchase order

Question 5

Which of the following is the best way to compensate for the lack of adequate segregation of duties in a small organization

Answer 5

Allowing for greater management oversight of incompatible activities

Question 6

Review of the audit log is an example of which of the following types of security control

Answer 6

Detective

Question 7

Which of the following is not a component of internal control as defined by COSO

Answer 7

Inherent risk

Question 8

Which of the following is considered an application input control?

Answer 8

Edit check

Question 9

Which of the following control activities should be taken to reduce the risk of incorrect processing in a newly installed computerized accounting system

Answer 9

Independently verify the transactions

Question 10

Which of the following statement is correct regarding internal control?

Answer 10

An inherent limitation to internal control is the fact that controls can be circumvented by management override

Question 11

Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been

Answer 11

Implemented

Question 12

A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following response to the risk

Answer 12

Risk reduction

Question 13

Each of the following types of controls is considered to be an entity-level control, except those

Answer 13

Regarding the company’s annual stockholder meeting

Question 14

Controls in the information technology area are classified into preventive, detective, and corrective categories. Which of the following is preventive control

Answer 14

Access control software

Question 15

All of the following are examples of internal control procedures except

Answer 15

Customer satisfaction surveys

Question 16

The Public Company Accounting Oversight Board (PCAOB) is not responsible for standards related to

Answer 16

Accounting practice

Question 17

Which of the following most likely would not be considered as an inherent limitation of the effectiveness of a firm’s internal control

Answer 17

Incompatible duties

Question 18

According to COSO which of the following is not a component of internal control

Answer 18

Control risk

Question 19

When considering internal control, an auditor should be aware of reasonable assurance, which recognizes that

Answer 19

The cost of an entity’s internal control should not exceed the benefits expected to be derived

Question 20

Proper segregation of duties calls for separation of the following functions

Answer 20

Authorization, recording, and custody

Question 21

An entity’s ongoing monitoring activities often include

Answer 21

Reviewing the purchasing function

Question 22

The overall attitude and awareness of a firm’s top management and board of directors concerning the importance of internal control is often reflected in its

Answer 22

Control environment

Question 23

Management philosophy and operating style would have a relatively less significant influence on a firm’s control environment when

Answer 23

Accurate management job descriptions delineate specific duties

Question 24

Control risk should be assessed in terms of

Answer 24

Financial statement assertions

Question 25

An auditor assesses control risk because it

Answer 25

affects the level of detection risk that the auditor may accept

Question 26

The framework could be used by management in its internal control assessment under requirements of SOX is the

Answer 26

All of the above are correct

Question 27

The internal control provisions of SOX apply to which companies in the United States

Answer 27

SEC registrants

Question 28

Reconciliation of cash accounts may be referred to as what type of control?

Answer 28

Detective

Question 29

Sound internal control dictates that immediately upon receiving checks from customers by mail, a responsible employee should

Answer 29

Prepare a summary listing of checks received

Question 30

Tracing shipping documents to pre-numbered sales invoices provides evidence that

Answer 30

Shipments to customers were properly invoiced

Question 31

Which of the following input controls is a numeric value computed to provide assurance that the original value has not been altered in construction or transmission

Answer 31

Check digit

Question 32

A customer intended to order 100 units of a product A, but incorrectly ordered nonexistent product B. Which of the following controls most likely would detect this error

Answer 32

Validity check

Question 33

Which of the following is an example of a validity check

Answer 33

The computer flags any transmission for which the control field value did not match that of an existing file record

Question 34

Which of the following is a computer test made to ascertain whether a given characteristic belongs to the group

Answer 34

Validity check