Question 1

Transaction controls are designed to ensure that transactions are properly valued.

Accepted Answer

Transaction controls are mechanisms put in place within an organization's processes and systems to ensure that all transactions are accurately recorded and valued, maintaining the integrity of financial information.

Question 2

Preventive controls are designed to provide reasonable assurance that the correct program is used for processing,all transactions are processed,and the transactions update appropriate files.

Accepted Answer

The answer of Preventive controls are designed to provide reasonable...

Question 3

Within the COSO framework,external communication includes only information sent by the organization to external parties,such as stockholders,customers,and regulators.

Accepted Answer

The COSO framework's external communication encompasses both information sent out by the organization to external parties and information received from external sources, facilitating a two-way flow of information.

Question 4

Preventive controls are generally more cost-efficient than detective controls.

Accepted Answer

Preventive controls are designed to stop problems before they occur, while detective controls are designed to find problems that have already occurred. Because preventive controls are implemented before an issue occurs, they are generally less expensive than waiting for an issue to occur and implementing a detective control. Therefore, preventive controls are generally more cost-efficient than detective controls.

Question 5

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 is a crucial control activity that is intended to prevent an individual from having too much control, which could lead to fraudulent activity or the ability to cover it up. By dividing responsibilities among different individuals, the risk of fraud is reduced.

Question 6

Physical controls to safeguard assets are not intended to include simple controls such as fences and locks.

Accepted Answer

Physical controls can include simple measures such as fences and locks, as they can prevent unauthorized access to assets.

Question 7

One of the components of internal control,monitoring,refers to the process of identifying,capturing,and exchanging information in a timely fashion to enable accomplishment of the organization's objectives.

Accepted Answer

Monitoring in the context of internal control refers to the process of assessing the quality of the internal control system over time, including regular management and supervisory activities, to ensure that controls are working as intended and are modified as necessary for changes in conditions.

Question 8

Segregation of duties is considered a part of the monitoring component of the COSO framework for internal control structure.

Accepted Answer

Segregation of duties is part of the control activities component of the COSO framework, not the monitoring component. Control activities are the actions taken to mitigate risks to the achievement of objectives, and segregation of duties is a key control activity to prevent errors or fraud.

Question 9

A transaction trail includes the documents and records that allow an auditor to trace a transaction from its origination through to its final disposition,or vice versa.

Accepted Answer

This statement is true. A transaction trail is a critical tool in auditing as it allows the auditor to track and verify the complete cycle of a transaction. It includes all relevant documents and records, such as purchase orders, invoices, receipts, and bank statements, that provide evidence of the transaction's occurrence and are used to determine its accuracy and completeness.

Question 10

One of the advantages of a computerized accounting system is that the computerized system eliminates the need for internal controls.

Accepted Answer

This statement is false. Internal controls are still necessary in a computerized accounting system to prevent errors, fraud, and ensure the accuracy of financial information.

Question 11

Self-checking digit algorithms have been developed to test for transposition errors associated with identification numbers.

Accepted Answer

Self-checking digit algorithms are specifically designed to detect transposition errors in identification numbers.

Question 12

A walkthrough involves following a transaction back from when it is reflected in the financial records to when it originated to determine if the controls are effectively designed and have been implemented.

Accepted Answer

A walkthrough typically involves tracing a transaction forward from its origination through to its reflection in the financial records to assess whether the controls related to the transaction have been effectively designed and implemented.

Question 13

Control activities may be implemented at the organizational level and at the transactional level.

Accepted Answer

Control activities can be implemented at both the organizational level, which includes activities such as establishing policies and procedures, as well as at the transactional level, which involves individual activities or processes within the organization.

Question 14

All organizations should evaluate and communicate internal control deficiencies in a timely manner to those parties responsible for taking corrective action,including senior management and the board of directors,as appropriate.

Accepted Answer

This statement is true according to the principles of internal control evaluation established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Effective communication of internal control deficiencies is essential to ensure timely and appropriate corrective action can be taken to prevent or mitigate potential risks to the organization. These deficiencies should be communicated to senior management and the board of directors, as appropriate, to ensure they are aware of the current state of internal controls and can take action to improve them if necessary.

Question 15

Effective monitoring of internal controls not only identifies risks but also responds to these risks appropriately.

Accepted Answer

Effective monitoring of internal controls involves not only identifying risks but also responding to them appropriately in order to prevent or mitigate potential harm. This may involve implementing additional controls, updating existing controls, or taking other actions to address identified risks. By doing so, organizations can ensure that their internal controls remain effective over time and help to protect against financial and operational risks.

Question 16

The payroll department should be responsible for signing payroll checks.

Accepted Answer

It is not recommended for the payroll department to sign payroll checks as this can create a conflict of interest and potential fraud. Instead, a separate individual or department should handle the signing of checks.

Question 17

A whistleblower function within an organization should include a process for bringing important ethical and financial issues to the audit committee.

Accepted Answer

A whistleblower function within an organization should include a process for bringing important ethical and financial issues to the audit committee to ensure proper investigation and resolution.

Question 18

Monitoring 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 internal controls is a crucial aspect of effective internal control. It involves regular assessment and evaluation of controls by relevant personnel to ensure they are designed and operating effectively, and taking any necessary actions to correct identified issues.

Question 19

Performing a walkthrough provides an understanding of the nature of processing in important accounting applications.

Accepted Answer

A walkthrough is a detailed review and testing of the accounting application system to identify potential issues and ensure efficient and accurate processing. It helps to gain an understanding of the nature of processing and uncover any control weaknesses or flaws in the system.

Question 20

Management is obligated to report significant deficiencies in the control structure in their annual report on internal control effectiveness required by the Sarbanes-Oxley Act.

Accepted Answer

The answer of Management is obligated to report significant deficiencies...

Quiz 3: Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor