Question 1

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

Accepted Answer

Risk appetite refers to the level of risk a company is willing to take in order to achieve its goals and objectives. This can vary depending on the company's industry, size, and overall business strategy. Inherent risk refers to the level of risk that exists without any controls in place, while residual risk is the remaining risk after controls have been implemented. Risk assessment refers to the process of identifying, analyzing, and evaluating potential risks to a company.

Question 2

Corporate policy that requires a purchasing agent and purchasing department manager to sign off on asset purchases over $1,500 is an example of
A) general authorization.
B) specific authorization.
C) special authorization.
D) generic authorization.

Accepted Answer

This is an example of specific authorization, as it applies to a particular type of transaction (asset purchases) and is limited to purchases over a certain dollar amount. General authorization would apply to a wider range of transactions and may not have a monetary limit, while special and generic authorization are not commonly used terms in this context.

Question 3

Which of the following would be considered a "red flag" for problems with management operating style if the question were answered "yes"?
A) Does management take undue business risks to achieve its objectives?
B) Does management attempt to manipulate performance measures such as net income?
C) Does management pressure employees to achieve results regardless of the methods?
D) All of the above statements would raise "red flags" if answered "yes."

Accepted Answer

All three statements are signs of potential problems with management operating style. Taking undue risks can lead to financial troubles, manipulating performance measures can lead to unethical behavior, and pressuring employees to achieve results regardless of methods can lead to a toxic work environment.

Question 4

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.

Accepted Answer

The COSO Enterprise Risk Management Integrated Framework emphasizes the importance of considering risk management during the setting of organizational strategies. This implies that risk management activities should not be treated as separate from business operations but rather be integrated into the organization's overall objectives and decision-making processes.

Question 5

When undertaking risk assessment,the expected loss is calculated like this.
A) Impact times expected loss
B) Impact times likelihood
C) Inherent risk times likelihood
D) Residual risk times likelihood

Accepted Answer

The expected loss is calculated by multiplying the impact of a potential risk by the likelihood of that risk occurring. This is important in determining the overall risk level and deciding on appropriate risk management strategies.

Question 6

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.

Accepted Answer

Background checks can help prevent unintentional errors, but they primarily aim to identify potential red flags in an employee's history that could indicate a likelihood to engage in fraudulent or criminal activity. Mandatory vacations and rotation of duties can also help catch fraudulent behavior by forcing employees to temporarily relinquish control of their responsibilities and allowing other employees to spot any irregularities. However, these policies may not necessarily deter employees who are disgruntled with the company, as they may still attempt to commit fraud or embezzlement out of revenge or desperation.

Question 7

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

Accepted Answer

Restricting access to assets is an aspect of the COSO ERM Framework control activities, not internal environment. The other attributes listed are all part of the internal environment.

Question 8

Store policy that allows retail clerks to process sales returns for $300 or less,with a receipt dated within the past 60 days,is an example of
A) general authorization.
B) specific authorization.
C) special authorization.
D) generic authorization.

Accepted Answer

General authorization refers to the routine approval of transactions within set limits, such as allowing clerks to process returns up to a certain amount without needing higher-level approval.

Question 9

Which component of the COSO Enterprise Risk Management Integrated Framework is concerned with understanding how transactions are initiated,data are captured and processed,and information is reported?
A) Information and communication
B) Internal environment
C) Event identification
D) Objective setting

Accepted Answer

The component of the COSO Enterprise Risk Management Integrated Framework concerned with understanding how transactions are initiated, data are captured and processed, and information is reported is Information and communication. This component involves ensuring that relevant information is identified, captured, and communicated in a timely and accurate manner. It also involves understanding how information flows within an organization and how it is used to support decision-making.

Question 10

Which of the following is not one of the eight interrelated risk and control components of COSO Enterprise Risk Management Framework?
A) Internal environment
B) Monitoring
C) Risk response
D) Event assessment

Accepted Answer

The eight interrelated risk and control components of COSO Enterprise Risk Management Framework are: (1) Internal environment, (2) Objective setting, (3) Event identification, (4) Risk assessment, (5) Risk response, (6) Control activities, (7) Information and communication, and (8) Monitoring. Event assessment is not one of the components listed in COSO ERM Framework.

Question 11

Generally in a risk assessment process,the first step is to
A) identify the threats that the company currently faces.
B) estimate the risk probability of negative events occurring.
C) estimate the exposure from negative events.
D) identify controls to reduce all risk to zero.

Accepted Answer

The first step in a risk assessment process is to identify the threats that the company currently faces. This allows for a better understanding of the risks and enables the development of effective risk management strategies. The other options listed are important steps in the risk assessment process, but they typically follow the identification of threats.

Question 12

A document that shows all projects that must be completed and the related IT needs in order to achieve long-range company goals is known as a
A) performance evaluation.
B) project development plan.
C) data processing schedule.
D) strategic master plan.

Accepted Answer

A strategic master plan is a detailed document that outlines a company's long-term goals and objectives, along with the projects that are required to achieve those goals. The plan also includes the necessary IT systems and infrastructure needed to support those projects. This document is typically created by senior management and serves as a roadmap for the organization's future growth and success.

Question 13

The SEC 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.

Accepted Answer

The SEC (Securities and Exchange Commission) and FASB (Financial Accounting Standards Board) are regulatory bodies that dictate accounting and financial reporting standards. Therefore, their influence directly affects an organization's internal environment, particularly in terms of financial reporting and compliance. The other options listed are not as closely tied to the SEC and FASB's areas of authority.

Question 14

The audit committee is responsible for
A) overseeing the internal control structure.
B) overseeing the financial reporting process.
C) working with the internal and external auditors.
D) All of the above are responsibilities.

Accepted Answer

The audit committee is responsible for overseeing the internal control structure, the financial reporting process, and working with the internal and external auditors. Therefore, option D - "All of the above are responsibilities" is the best answer.

Question 15

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

Accepted Answer

Reducing management layers and creating self-directed work teams both refer to the organizational structure of the company. Emphasizing continuous improvement could also be seen as a part of management philosophy and operating style, but the other two options are more specific to the idea of organizational structure. Commitment to competence, while important, is not directly related to these actions.

Question 16

The COSO Enterprise Risk Management Integrated Framework identifies four objectives necessary to achieve corporate goals.Objectives specifically identified include all of the following except
A) implementation of newest technologies.
B) compliance with laws and regulations.
C) effective and efficient operations.
D) reliable reporting.

Accepted Answer

The COSO Enterprise Risk Management Integrated Framework identifies four objectives necessary to achieve corporate goals - compliance with laws and regulations, effective and efficient operations, reliable reporting, and safeguarding of assets. Implementation of newest technologies is not explicitly identified as one of the objectives.

Question 17

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

Accepted Answer

The organizational structure lays out the lines of authority and responsibility and provides the overall framework for planning, directing, and controlling within an organization. Control activities, budget framework, and internal environment are all components of the broader organizational structure.

Question 18

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.

Accepted Answer

The main purpose of the audit committee is to provide independent oversight of the company's financial reporting process and provide a check and balance on management. The committee is typically made up of non-executive directors and should be independent from management. The committee is not usually chaired by the CFO, who is a part of management, and they do not typically conduct testing of controls on behalf of the external auditors.

Question 19

The risk that remains after management implements internal controls is
A) Inherent risk
B) Residual risk
C) Risk appetite
D) Risk assessment

Accepted Answer

Residual risk is the risk that remains after internal controls are implemented. Inherent risk is the risk before any controls are in place, risk appetite is the level of risk an organization is willing to accept, and risk assessment is the process of identifying, analyzing, and evaluating risks.

Question 20

The risk that exists before management takes any steps to control the likelihood or impact of a risk is
A) Inherent risk
B) Residual risk
C) Risk appetite
D) Risk assessment

Accepted Answer

Inherent risk is the risk that exists before any measures are taken to mitigate it. It is the risk that results from the nature of an activity or operation, and it cannot be eliminated entirely. It is the starting point for any risk management process.

Quiz 7: Control and Accounting Information Systems

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

Corporate policy that requires a purchasing agent and purchasing department manager to sign off on asset purchases over $1,500 is an example of

Which of the following would be considered a "red flag" for problems with management operating style if the question were answered "yes"?

The COSO Enterprise Risk Management Integrated Framework stresses that

When undertaking risk assessment,the expected loss is calculated like this.

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

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

Store policy that allows retail clerks to process sales returns for $300 or less,with a receipt dated within the past 60 days,is an example of

Which component of the COSO Enterprise Risk Management Integrated Framework is concerned with understanding how transactions are initiated,data are captured and processed,and information is reported?

Which of the following is not one of the eight interrelated risk and control components of COSO Enterprise Risk Management Framework?

Generally in a risk assessment process,the first step is to

A document that shows all projects that must be completed and the related IT needs in order to achieve long-range company goals is known as a

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

The audit committee is responsible for

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

The COSO Enterprise Risk Management Integrated Framework identifies four objectives necessary to achieve corporate goals.Objectives specifically identified include all of the following except

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

The audit committee of the board of directors

The risk that remains after management implements internal controls is

The risk that exists before management takes any steps to control the likelihood or impact of a risk is