Question 1

Monitoring of the internal controls involves assessment by appropriate personnel of the design and operation of controls on a timely basis and taking necessary actions.

Accepted Answer

Monitoring of internal controls involves ongoing assessment and evaluation of their design and operation, and taking necessary actions to address any deficiencies or weaknesses that may be identified. This helps to ensure that the controls are effective in achieving their intended objectives and mitigating risks. Timeliness is also important, as delays in monitoring and addressing control issues can lead to increased risk exposure and potential damage to the organization.

Question 2

In addition to controls being specific,they may be broad,such as policies regarding a code of ethics.

Accepted Answer

Broad controls such as policies regarding a code of ethics provide general guidelines and expectations for behavior within an organization.

Question 3

Investors and lenders are not concerned with internal control of the companies in which they invest.

Accepted Answer

Investors and lenders are very concerned with the internal control of companies in which they invest. This is because effective internal control systems reduce the risk of fraud or errors in financial reporting, which can impact the company's financial performance and ultimately affect the returns of its investors and lenders.

Question 4

A material weakness in internal control is a deficiency,or a combination of deficiencies,in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Accepted Answer

This statement accurately describes a material weakness in internal control over financial reporting.

Question 5

Control activities are the component of internal control that includes control actions that have been established by policies and procedures

Accepted Answer

The answer of Control activities are the component of internal...

Question 6

Control activities implemented to mitigate transaction processing risk that typically affect only certain processes,transactions,accounts,and assertions are referred as transaction or application controls.

Accepted Answer

The answer of Control activities implemented to mitigate transaction processing...

Question 7

Internal controls are considered to be part of corporate governance.

Accepted Answer

Internal controls are a set of measures and policies put in place by a company to ensure that it operates effectively and efficiently, safeguard its assets, comply with laws and regulations, and produce reliable financial reporting. As such, internal controls are an important component of corporate governance, which refers to the system of rules, practices, and processes by which a company is directed and managed. The goal of corporate governance is to promote transparency, accountability, and ethical behavior, and to protect the interests of shareholders and other stakeholders.

Question 8

Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting,compliance with laws and regulations and ineffective and inefficient operations.

Accepted Answer

The answer of Internal control is a process designed to...

Question 9

Physical controls are necessary to protect and safeguard assets from accidental or intentional destruction and theft.

Accepted Answer

Physical controls such as locks, alarms, access control systems, and surveillance cameras are essential to secure assets and prevent their loss or damage due to natural disasters, fires, incidents, or malicious activities. They ensure that only authorized personnel have access to sensitive data, equipment, or facilities and that any unauthorized entry or intrusion is detected and reported promptly. Without physical controls, organizations would be vulnerable to a variety of threats that could disrupt their operations, compromise their reputation, and harm their customers or stakeholders.

Question 10

The five major components of an organization's internal control are: the control environment,risk assessment,control activities,information and communication,and monitoring.

Accepted Answer

This statement is true. The five major components of an organization's internal control are the control environment, risk assessment, control activities, information and communication, and monitoring.

Question 11

The quality of an organization's internal control will affect both the audit approach and the amount of testing needed for an engagement.

Accepted Answer

The effectiveness of an organization's internal control will impact the auditor's assessment of risk and the level of testing needed for the audit. A strong internal control system can reduce the risk of material misstatements and allow the auditor to rely on those controls, reducing the extent of substantive testing. Conversely, weak internal controls will require more substantive testing to obtain sufficient assurance about the accuracy of the financial statements.

Question 12

An organization's control environment is established and maintained by the internal auditing department.

Accepted Answer

The control environment is established and maintained by management, not the internal auditing department. The internal auditing department is responsible for evaluating the effectiveness of the control environment and providing recommendations for improvement.

Question 13

A company's internal auditing function should not be considered when assessing the effectiveness of internal controls.

Accepted Answer

The internal auditing function is an important part of the internal control system and should be considered when assessing its effectiveness. Internal auditors provide an independent evaluation of the company's internal controls and can help identify areas for improvement.

Question 14

Preventative controls are designed to prevent the occurrence of a misstatement.

Accepted Answer

Preventative controls are designed to stop errors or fraud before they happen, thus preventing the occurrence of a misstatement. They are one of the three main types of internal controls, along with detective and corrective controls.

Question 15

The better the quality of the internal controls,the more an auditor can rely on the controls.

Accepted Answer

This statement is true. When the quality of internal controls is high, the auditor can rely on them more, as they provide better assurance that financial statements are free from material misstatements. Strong internal controls reduce the risk of errors or fraud going undetected and increase the likelihood of timely and accurate financial reporting. Conversely, when the quality of internal controls is low, the auditor must rely more on substantive testing to obtain reasonable assurance that the financial statements are free from material misstatement.

Question 16

Segregation of duties is a control activity that is designed to protect against the risk that an individual could both perpetrate and cover up a fraud.

Accepted Answer

Segregation of duties ensures that no single individual has complete control over a process from beginning to end, reducing the risk of fraud or errors going undetected. It also helps to prevent conflicts of interest and ensures that there are checks and balances in place.

Question 17

Effective control not only identifies risk but also responds to these risks appropriately.

Accepted Answer

Effective control involves not just identifying the risks, but also responding appropriately to them in order to manage and mitigate those risks. Therefore, the statement is true.

Question 18

Internal control are needed for all activities of the organization

Accepted Answer

Internal control is necessary for all activities of the organization to ensure that they are efficient, effective, and in compliance with laws and regulations. Strong internal controls help to minimize the risk of fraud, errors, and other financial irregularities.

Question 19

An auditor is not required to obtain evidence about the design and operation of the internal controls to conclude the controls are effective at preventing material misstatements from occurring.

Accepted Answer

An auditor is required to obtain evidence about the design and operation of internal controls to conclude whether the controls are effective at preventing material misstatements from occurring.

Question 20

Internal control is a process,effected by an entity's board of directors,management,and other personnel,designed to provide reasonable assurance regarding the achievement of objectives relating to operations,reporting,and compliance.

Accepted Answer

Internal control is indeed a process designed by an entity's board of directors, management, and other personnel with the aim of providing reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.

Quiz 3: Internal Control Over Financial Reporting: Managements Responsibilities and Importance to the External Auditors