Multiple Choice 1. An auditor’s primary consideration regarding an entity’s internal controls is whether they 2. Which of the following
statements about internal control is correct? 3. Internal control is a process designed to provide reasonable assurance regarding the achievement of which objective? 4. Monitoring is a major component of the COSO Internal Control—Integrated Framework. Which of the following is not
correct in how the company can implement the monitoring component? 5. After obtaining an understanding of an entity’s internal control system, an auditor may set
control risk at high for some assertions because he or she 6. Regardless of the assessed level of control risk, an auditor would perform some 8. Which of the following audit techniques would most likely provide an auditor with the most assurance about the effectiveness of the operation of a control? 9. The highest-quality and most reliable
audit evidence that segregation of duties is properly implemented is obtained by 10. SOC 1, Type 2 reports by the service organization’s auditor
typically 11. Significant deficiencies are matters that come to an auditor’s attention that should be
communicated to an entity’s audit committee because they represent 12. An auditor’s flowchart of an
entity’s accounting system is a diagrammatic representation that depicts the auditor’s 13. An auditor anticipates assessing control risk at a low level in an IT environment. Under these circumstances, on which of the following controls would the auditor initially
focus? What do internal controls reasonably ensure?Internal controls are intended to prevent errors and irregularities, identify problems and ensure that corrective action is taken.
What is collusion in internal control?Collusion – the risk that two or more employees could act together to undermine the functioning of an internal control. An example of this is a scenario where two engineers work together to facilitate the approval and release of an erroneous or malicious system change.
What are the 4 purposes of internal control?Internal controls function to minimize risks and protect assets, ensure accuracy of records, promote operational efficiency, and encourage adherence to policies, rules, regulations, and laws.
Why it is important for internal controls to be maintained?Good internal controls are essential to assuring the accomplishment of goals and objectives. They provide reliable financial reporting for management decisions. They ensure compliance with applicable laws and regulations to avoid the risk of public scandals.
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