Questions and Answers of Internal Auditing Assurance

What is a framework? What are the internal control frameworks recognized globally by management, independent outside accountants/auditors, and internal audit professionals?
What is residual risk?a. Impact of risk.b. Risk that is under control.c. Risk that is not managed.d. Underlying risk in the environment.
To meet waste discharge standards, a factory implements a control system designed to prevent the release of wastewater that does not meet those standards. One of the controls requires chemical
The requirement that purchases be made from suppliers on an approved vendor list is an example of a:a. Preventive control.b. Detective control.c. Compensating control.d. Monitoring control.
An organization has a goal to prevent the ordering of inventory quantities in excess of its needs. One individual in the organization wants to design a control that requires a review of all purchase
How does COSO define internal control?
An effective system of internal controls is most likely to detect a fraud perpetrated by a:a. Group of employees in collusion.b. Single employee.c. Group of managers in collusion.d. Single manager.
COSO is quoted in this chapter as follows: “…internal auditors provide assurance and advisory support to management on internal control…the internal audit function includes evaluating the
What are objectives? What three categories of objectives are set forth in the COSO framework?
The control that would most likely ensure that payroll checks are written only for authorized amounts is to:a. Conduct periodic floor verification of employees on the payroll.b. Require the return of
An internal auditor plans to conduct an audit of the adequacy of controls over investments in new financial instruments. Which of the following would not be required as part of such an engagement?a.
What does the control environment comprise?
Appropriate internal control for a multinational corporation’s branch office that has a department responsible for the transfer of money requires that:a. The individual who initiates wire transfers
What does risk assessment involve?
What are control activities? What types of control activities are present in a well-designed system of internal controls?
Who has primary responsibility for the monitoring component of internal control?a. The organization’s independent outside auditor.b. The organization’s internal audit function.c. The
What is high-quality information? Why must high-quality information be communicated?
Reasonable assurance, as it pertains to internal control, means that:a. The objectives of internal control vary depending on the method of data processing used.b. A well-designed system of internal
When are monitoring activities most effective? Who performs monitoring activities? What distinguishes separate evaluations from ongoing monitoring activities?
Which of the following best exemplifies a control activity referred to as independent verification?a. Reconciliation of bank accounts by someone who does not handle cash or record cash
What are the 17 principles of internal control defined by COSO?
COSO’s Internal Control Framework consists of five internal control components and 17 principles for achieving effective internal control. Which of the following is/are (a) principle(s)?I. The
The risk assessment component of internal control involves the:a. Independent outside auditor’s assessment of residual risk.b. Internal audit function’s assessment of control deficiencies.c.
What responsibilities do the following groups of people have regarding internal control?■ Management.■ The board of directors.■ Internal auditors.■ Others in the organization.■ The
What does “limitations of internal control” mean? Provide examples of limitations that are inherent to internal control.
When assessing the risk associated with an activity, an internal auditor should:a. Determine how the risk should best be managed.b. Provide assurance on the management of the risk.c. Update the risk
What is inherent risk? What is controllable risk? What is residual risk?
Determining that engagement objectives have been met is ultimately the responsibility of the:a. Internal auditor.b. Audit committee.c. Internal audit supervisor.d. CAE.
How does internal auditors’ perspective of internal control differ from management’s perspective?
An adequate system of internal controls is most likely to detect an irregularity perpetrated by a:a. Group of employees in collusion.b. Single employee.c. Group of managers in collusion.d. Single
How do entity-level controls differ from process-level and transaction-level controls?
What is a key control? What is a secondary control? What is a compensating control?
What are the two broad types of information systems (technology) controls?
How is the system of internal controls evaluated?

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