Question 1

According to the COSO Enterprise Risk Management Framework,the risk assessment process incorporates all of the following components except

Accepted Answer

The risk assessment process, as outlined in the COSO ERM Framework, includes identifying events, evaluating their potential impact on objectives, and establishing a risk appetite. Reporting potential risks to auditors may be a component of the risk management process, but it is not part of the risk assessment process specifically.

Question 2

Ferdinand Waldo Demara was known as the great imposter.He had an astounding ability to convince people that he was who he truly was not.He worked as a naval officer,physician,college teacher,prison warden,and other jobs without any of the prerequisite qualifications.By not diligently checking references,the organizations fooled by Demara (including the Canadian Navy)apparently chose to ________ the risk of fraud.

Accepted Answer

The sentence suggests that the organizations did not check Demara's credentials and consequently were fooled by him, implying that they were willing to take the risk of fraud. Therefore, the best choice is D) accept.

Question 3

The organization chart for Geerts Corporation includes a controller and an information processing manager,both of whom report to the vice president of finance.Which of the following would be a control weakness?

Accepted Answer

The answer of The organization chart for Geerts Corporation includes...

Question 4

River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa.Management has determined that there is one chance in a thousand of a client being injured or killed.Settlement of resulting lawsuits has an average cost of $650,000.Insurance with a $50,000 deductible is available.It covers the costs of lawsuits,unless there is evidence of criminal negligence.What is the impact of this risk without insurance?

Accepted Answer

Without insurance, the cost of settling lawsuits resulting from a client being injured or killed would be an average of $650,000.

Question 5

Due to data errors occurring from time to time in processing the Albert Company's payroll,the company's management is considering the addition of a data validation control procedure that is projected to reduce the risk of these data errors from 13% to 2%.The cost of the payroll reprocessing is estimated to be $11,000.The cost of implementing the data validation control procedure is expected to be $700.Which of the following statements is true?

Accepted Answer

The benefit of implementing the data validation control procedure can be calculated as follows:

Benefit = (reduction in risk x cost of reprocessing) - cost of implementation
Benefit = (0.13-0.02) x $11,000 - $700
Benefit = $1,210 - $700
Benefit = $510

Since the net estimated benefit of implementing the data validation control procedure is positive, it should be implemented. Therefore, option A is the correct answer. Option B is not entirely correct as it only considers the cost comparison between the two options, but not the net benefit. Option C and D are incorrect as they do not consider the reduction in risk of data errors, which is an important consideration for the company.

Question 6

Which of the following is not a violation of the Sarbanes-Oxley Act (SOX)? The management at Folding Squid Technologies

Accepted Answer

The answer of Which of the following is not a...

Question 7

Hiring decisions at Frazier's Razors are made by Sheila Frazier,the Director of Human Resources.Pay rates are approved by the Vice President for Operations.At the end of each pay period,supervisors submit time cards to Sheila,who prepares paycheck requisitions.Paychecks are then distributed through the company's mail room.This represents a(an)________ segregation of duties.

Accepted Answer

The answer of Hiring decisions at Frazier's Razors are made...

Question 8

A ________ shows how a project will be completed,including tasks and who will perform them as well as a timeline and cost estimates.

Accepted Answer

A project development plan is a comprehensive document that outlines the details of a project, including the tasks involved, who will perform them, the timeline for completing them, and cost estimates. It serves as a roadmap for the project team and guides them through the project's execution. A performance evaluation assesses the effectiveness of a completed project, a steering committee provides oversight and guidance during a project's lifecycle, and a strategic master plan outlines an organization's long-term goals and objectives.

Question 9

Petty cash is disbursed by the Fred Haynes in the Cashier's Office.He also maintains records of disbursements,places requests to the Finance Department to replace expended funds,and periodically reconciles the petty cash balance.This represents a(an)________ segregation of duties.

Accepted Answer

The situation described is an ineffective segregation of duties because Fred Haynes is responsible for multiple roles that should be separated to prevent errors or fraud, such as disbursing cash, maintaining records, and reconciling balances.

Question 10

A ________ is created to guide and oversee systems development and acquisition.

Accepted Answer

A steering committee is typically established to provide guidance and oversight for systems development and acquisition projects. The committee is responsible for ensuring that the project is aligned with organizational goals, stays within budget and scope, and meets user needs. The committee also provides strategic direction and evaluates overall project performance. The other options listed are not specific to systems development and acquisition.

Question 11

Which of the following is an independent check on performance?

Accepted Answer

The General Manager comparing budgeted amounts with expenditure records from all departments is an independent check on performance because it involves someone outside of the department or team responsible for the expenditures reviewing the records and comparing them to predetermined budgets. Choices A, B, and D are all internal controls or checks performed by employees within the organization.

Question 12

FranticHouse Partners,L.L.C.,does home remodeling and repair.The firm does not accept jobs that require the installation of slate or copper roofing because these materials often require costly post-installation services.The firm's risk exposure to costly post-installation services is

Accepted Answer

FranticHouse Partners, L.L.C. has decided to avoid jobs that require the installation of slate or copper roofing because they have recognized that these materials often require costly post-installation services. By avoiding such jobs, the firm can reduce its risk exposure to these costly services altogether. Therefore, the best choice is C, avoided.

Question 13

Chuck Hewitt was relaxing after work with a colleague at a local watering hole.Well into his second martini,he began expressing his opinions about his company's budgeting practices.It seems that,as a result of "budget handcuffs" that require managers to explain material deviations from budgeted expenditures,his ability to creatively manage his department's activities have been curtailed.The level of control that the company is using in this case is a

Accepted Answer

Diagnostic control systems are used to monitor outcomes and evaluate performance against standards. In this situation, the company's budgeting practices are creating a level of control that is monitoring and evaluating managers' performance against budgeted expenditures.

Question 14

River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa.Management has determined that there is one chance in a thousand of a client being injured or killed.Settlement of resulting lawsuits have an average cost of $650,000.Insurance with a $50,000 deductible is available.It covers the costs of lawsuits,unless there is evidence of criminal negligence.Based on cost-benefit analysis,what is the most that the business should pay for the insurance?

Accepted Answer

To determine the most that the business should pay for insurance, we need to calculate the expected loss of not having insurance and compare it to the cost of the insurance. 
Expected loss = probability of being sued * cost of a lawsuit = (1/1000) * $650,000 = $650 
Since the deductible is $50,000, the insurance would cover $600,000 ($650,000 - $50,000) of the cost of a lawsuit. 
Therefore, if the insurance costs less than $600, it would be worth buying. Choice C) $600 is the closest option, and the most appropriate answer.

Question 15

River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa.Management has determined that there is one chance in a thousand of a client being injured or killed.Settlement of resulting lawsuits has an average cost of $650,000.Insurance with a $50,000 deductible is available.It covers the costs of lawsuits,unless there is evidence of criminal negligence.What is the expected loss with insurance?

Accepted Answer

The expected loss with insurance is calculated by multiplying the probability of an incident (1/1000) by the deductible amount ($50,000), resulting in an expected loss of $50.

Question 16

Global Economic Strategies,L.L.D.,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.They are transitioning from a ________ to a ________ control framework.

Accepted Answer

The transition described involves moving from the COSO-Integrated Framework, which focuses on internal controls, to the COSO-ERM (Enterprise Risk Management) framework, which includes specifying objectives, identifying uncertainties, and developing contingency plans.

Question 17

River Rafting Adventures of Iowa provides rafts and tour guides to tourists eager to ride the wild rivers of Iowa.Management has determined that there is one chance in a thousand of a client being injured or killed.Settlement of resulting lawsuits has an average cost of $650,000.Insurance with a $50,000 deductible is available.It covers the costs of lawsuits,unless there is evidence of criminal negligence.What is the expected loss without insurance?

Accepted Answer

The expected loss without insurance is calculated by multiplying the probability of an incident (1/1000) by the average cost of a lawsuit ($650,000), which equals $650.

Question 18

The Sarbanes-Oxley Act (SOX)applies to

Accepted Answer

The Sarbanes-Oxley Act applies only to publicly held companies, not to private companies.  It does not have a revenue threshold, and therefore, all publicly held companies are subject to its provisions.

Question 19

FranticHouse Partners,L.L.C.,does home remodeling and repair.All employees are bonded,so the firm's risk exposure to employee fraud is

Accepted Answer

The answer of FranticHouse Partners,L.L.C.,does home remodeling and repair.All employees...

Question 20

Chuck Hewitt was relaxing after work with a colleague at a local watering hole.Well into his second martini,he began expressing his opinions about his work environment.It seems that,as a result of "feminazi" interference,the suggestive banter that had been prevalent in the workplace during his youth was no longer acceptable.He even had to sit through a sexual harassment workshop! The level of control that the company is using in this case is a

Accepted Answer

Boundary systems are used to set limits on behavior, often through rules and codes of conduct, such as those related to preventing sexual harassment in the workplace.

Quiz 7: Control and Accounting Information Systems