Question 1

A strong component of internal control can reduce all the financial reporting risks to zero.

Accepted Answer

While a strong component of internal control can significantly reduce the likelihood and impact of financial reporting risks, it cannot eliminate all risks entirely due to inherent limitations, such as human error or potential for override.

Question 2

Documentation should clearly identify each component of the internal control framework.

Accepted Answer

Clear documentation of each component of the internal control framework is essential for understanding, evaluating, and communicating the organization's control environment, risk assessment processes, control activities, information and communication systems, and monitoring activities.

Question 3

Auditors gain an understanding of control risk for each relevant assertion for each important class of transactions and each significant account balance as a basis for planning the audit.

Accepted Answer

Auditors assess control risk to determine the nature, timing, and extent of audit procedures for each relevant assertion related to significant account balances and classes of transactions as part of audit planning.

Question 4

Which one of the following groups is not interested in an organisation's control structure?&#10;A) board members&#10;B) lenders&#10;C) auditors&#10;D) environmental groups

Accepted Answer

Environmental groups are typically more concerned with an organization's impact on the environment rather than its internal control structure.

Question 5

The components of internal control includes all of the following except:&#10;A) management philosophy and operating style&#10;B) methods of assigning authority and responsibility&#10;C) personnel policies and practices&#10;D) control activities

Accepted Answer

Control activities are actually a part of internal control components, not an exception. The components of internal control, as defined by frameworks such as COSO, include the control environment, risk assessment, control activities, information and communication, and monitoring activities. Management philosophy and operating style, methods of assigning authority and responsibility, and personnel policies and practices all fall under the control environment category, which is a component of internal control.

Question 6

Which of the following is not a component of the COSO framework for internal control?&#10;A) risk assessment&#10;B) control activities&#10;C) monitoring&#10;D) corporate governance

Accepted Answer

The COSO framework for internal control consists of five components: control environment, risk assessment, control activities, information and communication, and monitoring. Corporate governance is not listed as a component of the COSO framework; it is a broader concept that encompasses the entire system by which a company is directed and controlled.

Question 7

The components of internal control includes which of the following?&#10;A) control activities&#10;B) management philosophy and operating style&#10;C) assessing activity level risks&#10;D) application level controls

Accepted Answer

The answer of The components of internal control includes which...

Question 8

Computer controls that are pervasive and affect every computerised system are known as:&#10;A) overall computer controls&#10;B) general computer controls&#10;C) application controls&#10;D) processing controls

Accepted Answer

General computer controls (GCC) are designed to ensure the proper development and implementation of applications, the integrity of program and data files, and the security of the overall computer environment. They are pervasive and affect every computerized system within an organization.

Question 9

Which of the following is part of the components of internal control of an organisation?&#10;A) management's philosophy and operating style&#10;B) organisational structure&#10;C) human resources&#10;D) all of the above

Accepted Answer

All of the options listed (management's philosophy and operating style, organisational structure, and human resources) are components of an organization's internal control system. These elements work together to ensure the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with laws and regulations.

Question 10

Components of internal control&#9;&#10;One of the elements of an organisation's control system is the 'components of internal control'. Identify at least four factors that the auditor should consider when reviewing the components of internal control and discuss how the auditor would relate this review to the assessment of control risk.

Accepted Answer

The answer of Components of internal control&#9;&#10;One of the elements...

Question 11

Integrated audit&#10;Discuss the fundamental control concepts an auditor should focus on when evaluating the organisation's data processing.

Accepted Answer

The answer of Integrated audit&#10;Discuss the fundamental control concepts an...

Deck 6: Internal Control Over Financial Reporting