Deck 7: Control and Accounting Information Systems

Question 1

Hiring qualified personnel is an example of a ________ control,and procedures to resubmit rejected transactions are an example of a ________ control.

A)corrective; detective
B)detective; corrective
C)preventive; corrective
D)detective; preventive

Answer 1

C

Question 2

A control procedure designed so that the employee that records cash received from customers does not also have access to the cash itself is an example of a(n)

A)preventive control.
B)detective control.
C)corrective control.
D)authorization control.

Answer 2

A

Question 3

Identify the preventive control below.

A)Reconciling the bank statement to the cash control account.
B)Approving customer credit prior to approving a sales order.
C)Maintaining frequent backup records to prevent loss of data.
D)Counting inventory on hand and comparing counts to the perpetual inventory records.

Answer 3

B

Question 4

Describe the reasons organizations have not adequately protected data.

Question 5

Internal controls are often segregated into

A)detective controls and preventive controls.
B)general controls and application controls.
C)process controls and general controls.
D)system controls and application controls.

Question 6

Identify the detective control below.

A)Reconciling the bank statement to the cash control account.
B)Approving customer credit prior to approving a sales order.
C)Maintaining frequent backup records to prevent loss of data.
D)Ensuring that the employee who records cash received from customers does not also have access to the cash itself.

Question 7

Maintaining backup copies of files,correcting data entry errors,and resubmitting transactions for subsequent processing are examples of what type of control?

A)Preventive control
B)Detective control
C)Corrective control
D)Authorization control

Question 8

Duplicate checking of calculations and preparing bank reconciliations and monthly trial balances are examples of what type of control?

A)Preventive control
B)Detective control
C)Corrective control
D)Authorization control

Question 9

A(n)________ measures company progress by comparing actual performance to planned performance.

A)boundary system
B)diagnostic control system
C)interactive control system
D)belief system

Question 10

According to The Sarbanes-Oxley Act of 2002,the audit committee of the board of directors is directly responsible for

A)hiring and firing the external auditors.
B)performing tests of the company's internal control structure.
C)certifying the accuracy of the company's financial reporting process.
D)overseeing day-to-day operations of the internal audit department.

Question 11

Duplicate checking of calculations is an example of a ________ control,and procedures to resubmit rejected transactions are an example of a ________ control.

A)corrective; detective
B)detective; corrective
C)preventive; corrective
D)detective; preventive

Question 12

Which of the following measures can protect a company from AIS threats?

A)Take a proactive approach to eliminate threats.
B)Detect threats that do occur.
C)Correct and recover from threats that do occur.
D)All of the above are proper measures for the accountant to take.

Question 13

Which type of control is associated with making sure an organization's control environment is stable?

A)general
B)application
C)detective
D)preventive

Question 14

Internal control is often referred to as a(n)________,because it permeates an organization's operating activities and is an integral part of management activities.

A)event
B)activity
C)process
D)system

Question 15

Identify the corrective control below.

A)Reconciling the bank statement to the cash control account.
B)Approving customer credit prior to approving a sales order.
C)Maintaining frequent backup records to prevent loss of data.
D)Counting inventory on hand and comparing counts to the perpetual inventory records.

Question 16

Why are threats to accounting information systems increasing?

A)Many companies have invested significant resources to protect their assets.
B)Many companies do not realize that data security is crucial to their survival.
C)Many companies believe that protecting information is a vital strategic requirement.
D)Computer control problems are often overestimated and overly emphasized by management.

Question 17

The primary purpose of the Foreign Corrupt Practices Act of 1977 was

A)to require corporations to maintain a good system of internal control.
B)to prevent the bribery of foreign officials by American companies.
C)to require the reporting of any material fraud by a business.
D)All of the above are required by the act.

Question 18

Which type of control prevents,detects,and corrects transaction errors and fraud?

A)general
B)application
C)detective
D)preventive

Question 19

Congress passed this federal law for the purpose of preventing financial statement fraud,to make financial reports more transparent and to strengthen the internal control of public companies.

A)Foreign Corrupt Practices Act of 1977
B)The Securities Exchange Act of 1934
C)The Sarbanes-Oxley Act of 2002
D)The Securities Exchange Act of 1933

Question 20

Which of the following was not an important change introduced by the Sarbanes-Oxley Act of 2002?

A)New roles for audit committees
B)New rules for auditors and management
C)New rules for internal control requirements
D)New rules for information systems development

Question 21

Which internal control framework is widely accepted as the authority on internal controls?

A)COBIT.
B)ISACA framework.
C)COSO Integrated Control.
D)Sarbanes-Oxley control framework.

Question 22

Why was the original 1992 COSO - Integrated Control framework updated in 2013?

A)Congress required COSO to modernize.
B)U.S. stock exchanges required more disclosure.
C)As an effort to more effectively address technological advancements.
D)As an effort to comply with the Information System Audit and Control Association requirements.

Question 23

Lauren Smith was relaxing after work with a colleague at a local bar.After a few drinks,she began expressing her feelings about her company's new control initiatives.It seems that as a result of controls put in place by the company,she now has to be more creative in solving problems and avoiding actions that might have a negative effect on her company's reputation.The level of control that the company is using in this case is a(n)

A)boundary system.
B)diagnostic control system.
C)interactive control system.
D)belief system.

Question 24

The Sarbanes-Oxley Act (SOX)applies to

A)all companies with gross annual revenues exceeding $500 million.
B)publicly traded companies with gross annual revenues exceeding $500 million.
C)all private and public companies incorporated in the United States.
D)all publicly traded companies.

Question 25

Identify the statement below that is not true of the 2013 COSO Internal Control updated framework.

A)It more efficiently deals with control implementation and documentation issues.
B)It more effectively deals with control implementation and documentation issues.
C)It provides users with more precise guidance.
D)It adds many new examples to clarify the framework concepts.

Question 26

The COSO Enterprise Risk Management Integrated Framework stresses that

A)risk management activities are an inherent part of all business operations and should be considered during strategy setting.
B)effective risk management is comprised of just three interrelated components; internal environment, risk assessment, and control activities.
C)risk management is the sole responsibility of top management.
D)risk management policies, if enforced, guarantee achievement of corporate objectives.

Question 27

Describe some of the most important aspects of Sarbanes-Oxley Act (SOX)and discuss why SOX was important to accountants.

Question 28

Which of the following is not a violation of the Sarbanes-Oxley Act (SOX)? The management at Lasalle Investment group

A)asked their auditors to make recommendations for the redesign of their information technology system and to aid in the implementation process.
B)did not mention to auditors that the company had experienced material weaknesses in the company's internal control systems during the past year.
C)selected the company's CEO to chair the audit committee.
D)hired the manager from the external audit team as company CFO twelve months after the manager had worked on the audit.

Question 29

How many principles are there in the 2013 updated COSO - Internal Control Framework?

A)5
B)8
C)17
D)21

Question 30

A(n)________ helps employees understand management's vision.It communicates company core values and inspires employees to live by those values.

A)boundary system
B)diagnostic control system
C)interactive control system
D)belief system

Question 31

The COBIT5 framework primarily relates to

A)best practices and effective governance and management of private companies.
B)best practices and effective governance and management of public companies.
C)best practices and effective governance and management of information technology.
D)best practices and effective governance and management of organizational assets.

Question 32

The COSO ERM contains all five of the same COSO-Integrated Framework components.

Question 33

Discuss the weaknesses in COSO's internal control framework that led to the development of the COSO Enterprise Risk Management framework.

Question 34

Lauren Smith was relaxing after work with a colleague at a local bar.After a few drinks,she began expressing her feelings about her company's new control initiatives.It seems that as a result of controls put in place by the company,she now has to find ways to help her staff to better understand the company's vision and core values.The level of control that the company is using in this case is a(n)

A)boundary system.
B)diagnostic control system.
C)interactive control system.
D)belief system.

Question 35

Nolwenn Limited has been diligent in ensuring that their operations meet modern control standards.Recently,they have extended their control compliance system by incorporating policies and procedures that require the specification of company objectives,uncertainties associated with objectives,and contingency plans.Nolwenn Limited is transitioning from a ________ to a ________ control framework.

A)COSO-Integrated Framework; COBIT
B)COBIT; COSO-Integrated Framework
C)COBIT; COSO-ERM
D)COSO-Integrated Framework; COSO-ERM
E)COSO-ERM; COBIT

Question 36

Which of the following is not one of the five principles of COBIT5?

A)meeting stakeholder needs
B)covering the enterprise end-to-end
C)enabling a holistic approach
D)improving organization efficiency

Question 37

Which of the following is not a component of the COSO Enterprise Risk Management Integrated Framework (ERM)?

A)Monitoring.
B)Ethical culture.
C)Risk assessment.
D)Control environment.

Question 38

A(n)________ helps top-level managers with high-level activities that demand frequent and regular attention.

A)boundary system
B)diagnostic control system
C)interactive control system
D)belief system

Question 39

Explain why the Foreign Corrupt Practices Act was important to accountants.

Question 40

A(n)________ helps employees act ethically.

A)boundary system
B)diagnostic control system
C)interactive control system
D)belief system

Question 41

Melissa is a staff accountant for Quality Paper Company,which has strict corporate policies on appropriate use of corporate resources.The first week of March,Melissa saw Kent,the branch manager putting printer paper and toner into his briefcase on his way out the door.This situation best reflects a weakness in which aspect of internal environment,as discussed in the COSO Enterprise Risk Management Framework?

A)Integrity and ethical values.
B)Risk management philosophy.
C)Restrict access to assets.
D)Methods of assigning authority and responsibility.

Question 42

The principle of identifying and assessing changes that could significantly impact the system of internal control belongs to which of the COSO's Internal Control Model's component?

A)Control environment.
B)Risk assessment.
C)Control activities.
D)Information and communication.

Question 43

Applying the COBIT5 framework,monitoring is the responsibility of

A)the CEO.
B)the CFO.
C)the board of directors.
D)all of the above

Question 44

Which of the following is not a factor of internal environment according to the COSO Enterprise Risk Management Framework?

A)Analyzing past financial performance and reporting.
B)Providing sufficient resources to knowledgeable employees to carry out duties.
C)Disciplining employees for violations of expected behavior.
D)Setting realistic targets for long-term performance.

Question 45

The purpose of the COSO Enterprise Risk Management framework is

A)to improve the organization's risk management process.
B)to improve the organization's financial reporting process.
C)to improve the organization's manufacturing process.
D)to improve the organization's internal audit process.

Question 46

The principle of selecting and developing controls that might help mitigate risks to an acceptable level belongs to which of the COSO's Internal Control Model's component?

A)Control environment.
B)Risk assessment.
C)Control activities.
D)Information and communication.

Question 47

Applying the COBIT5 framework,planning is the responsibility of

A)the CEO.
B)the CFO.
C)the board of directors.
D)all of the above

Question 48

Helping employees understand entity goals and objectives and then holding them accountable for achieving them are all related to which aspect of internal environment?

A)Organizational structure.
B)Methods of assigning authority and responsibility.
C)Management philosophy and operating style.
D)Commitment to competence.

Question 49

The largest differences between the COSO Integrated Control (IC)framework and the COSO Enterprise Risk Management (ERM)framework is

A)IC is controls-based, while the ERM is risk-based.
B)IC is risk-based, while ERM is controls-based.
C)IC is required, while ERM is optional.
D)IC is more applicable to international accounting standards, while ERM is more applicable to generally accepted accounting principles.

Question 50

Melissa is a staff accountant for Quality Paper Company suspected that management might have used "creative accounting" to improve company performance.This situation best reflects a weakness in which aspect of internal environment,as discussed in the COSO Enterprise Risk Management Framework?

A)Integrity and ethical values.
B)Risk management philosophy.
C)Restrict access to assets.
D)Methods of assigning authority and responsibility.

Question 51

The principle of holding individuals accountable for their internal control responsibilities in pursuit of objectives belongs to which of the COSO's Internal Control Model's component?

A)Control environment.
B)Risk assessment.
C)Control activities.
D)Information and communication.

Question 52

The audit committee of the board of directors

A)is usually chaired by the CFO.
B)conducts testing of controls on behalf of the external auditors.
C)provides a check and balance on management.
D)does all of the above.

Question 53

The principle of obtaining or generating relevant,high-quality information to support internal control belongs to which of the COSO's Internal Control Model's component?

A)Control environment.
B)Risk assessment.
C)Control activities.
D)Information and communication.

Question 54

Personnel policies such as background checks,mandatory vacations,and rotation of duties tend to deter

A)unintentional errors.
B)employee fraud or embezzlement.
C)fraud by outsiders.
D)disgruntled employees.

Question 55

Applying the COBIT5 framework,governance is the responsibility of

A)internal audit.
B)external audit.
C)management.
D)the board of directors.

Question 56

Reducing management layers,creating self-directed work teams,and emphasizing continuous improvement are all related to which aspect of internal environment?

A)Organizational structure.
B)Methods of assigning authority and responsibility.
C)Management philosophy and operating style.
D)Commitment to competence.

Question 57

The SEC,PCAOB,and FASB are best described as external influences that directly affect an organization's

A)hiring practices.
B)philosophy and operating style.
C)internal environment.
D)methods of assigning authority.

Question 58

Describe the five components of the COSO's Internal Control Model.

Question 59

Which of the following is not a basic principle of the COSO ERM framework?

A)Companies are formed to create value for society.
B)Management must decide how much uncertainty it will accept to create value.
C)Uncertainty results in risk.
D)Uncertainty results in opportunity.

Question 60

The definition of the lines of authority and responsibility and the overall framework for planning,directing,and controlling is laid out by the

A)control activities.
B)organizational structure.
C)budget framework.
D)internal environment.

Question 61

________ remains after management implements internal control(s).

A)Inherent risk
B)Residual risk
C)Risk appetite
D)Risk assessment

Question 62

According to the ERM model,________ help to deal with the effectiveness and efficiency of company operations,such as performance and profitability goals.

A)compliance objectives
B)operations objectives
C)reporting objectives
D)strategic objectives

Question 63

Explain why management's philosophy and operating style are considered to be the most important element of the internal environment.

Question 64

Using the COSO definition of an event,an event represents uncertainty.

Question 65

The amount of risk a company is willing to accept in order to achieve its goals and objectives is

A)inherent risk.
B)residual risk.
C)risk appetite.
D)risk assessment.

Question 66

According to the ERM model,________ help to ensure the accuracy,completeness and reliability of internal and external company reports.

A)compliance objectives
B)operations objectives
C)reporting objectives
D)strategic objectives

Question 67

________ is the risk that exists before management takes any steps to mitigate it.

A)Inherent risk
B)Residual risk
C)Risk appetite
D)Risk assessment

Question 68

Which attribute below is not an aspect of the COSO ERM Framework internal environment?

A)Enforcing a written code of conduct.
B)Holding employees accountable for achieving objectives.
C)Restricting access to assets.
D)Avoiding unrealistic expectations.

Question 69

According to the ERM model,________ help to align high level goals with the company's mission.

A)compliance objectives
B)operations objectives
C)reporting objectives
D)strategic objectives

Question 70

________ is not a risk response identified in the COSO Enterprise Risk Management Framework.

A)Acceptance
B)Avoidance
C)Monitoring
D)Sharing

Question 71

What are some of the ways to assign authority and responsibility within an organization?

Question 72

Identify the most correct statement with regards to an event.

A)An event identified by management will occur.
B)An event identified by management may or may not occur.
C)An event identified by management may not trigger other events.
D)It is easy to determine which events are most likely to occur.

Question 73

Which of the following is a commonly used technique to identify potential events?

A)Using data mining.
B)Browsing news articles.
C)Hiring a business process consultant.
D)None of the above.

Question 74

Which of the following is the most effective way in uncovering fraud schemes that require ongoing perpetrator's attention?

A)Hiring a forensic specialist.
B)Requiring employees to take mandatory vacations.
C)Installing security cameras to monitor employees activities.
D)Implementing a fraud hotline.

Question 75

According to the ERM model,________ help the company address all applicable laws and regulations.

A)compliance objectives
B)operations objectives
C)reporting objectives
D)strategic objectives

Question 76

How is expected loss calculated when performing risk assessment?

A)Impact times expected loss.
B)Impact times likelihood.
C)Inherent risk times likelihood.
D)Residual risk times likelihood.

Question 77

Best Friends,Incorporated is a publicly traded company where three BFF's (best friends forever)serve as its key officers.This situation

A)violates the Sarbanes-Oxley Act.
B)violates the Securities and Exchange Act.
C)increases the risk associated with an audit.
D)All of the above.

Question 78

Discuss the internal environment and identify the elements that comprise the internal environment.

Question 79

Describe what is an event using the COSO definition and provide an example.

Question 80

Why are most fraud not being reported or prosecuted?