1. A system of internal control consists of policies and procedures designed to provide management with

A. assurance that thefirm's resources will be used in the optimal way.

B. reasonable assurance that the company achieves its objectives.

C. reasonable assurance that fraud will be detected.

D. assurance that fraud will be prevented.

2. Who is responsible to identify and assess the risks and then manage and mitigate those risks by the implementation of a strong system of internalcontrol?

A. management

B. external auditors

C. internal auditors

D. shareholders

3. Management's objectives with respect to internal control include

A. preventing fraud and illegal activities at all costs.

B. providing reasonable assurance that the company can achieve its objectives and goals.

C. having reasonable assurance that the financial statements are in accordance with IFRS or ASPE.

D. ensuring that all policies and procedures are clearly documented to reduce employee training costs.

4. The Sarbanes Oxley Act has had consequences for many areas of corporateactivities, including the following impact on the work of theauditor:

A. The auditor is specifically required to assess and report on the effectiveness of internal control over financial reporting.

B. The auditor must monitor how well management is carrying out its financial reporting responsibilities.

C. The auditor must put together a report verifying the information in the financial statements.

D. The auditor is now required to report all fraudulent activitieshe/she uncovers directly to the Securities and Exchange Commission.

5. Carrie is the manager of the Bay Street Pharmacy. Carrie is considering implementing a security tag system to reduce the losses related to stolen goods at their store. The system Carrie is looking at currently costs$60 000 and is expected to be effective for 5 years. In order to justify the implementation of the security tagsystem, average theft per year should be at least

A. $1000.

B. $60 000.

C. $12 000.

D. Theft should be prevented at all costs.

6. Internal controls can never be regarded as completely effective. Even if systems personnel could design an idealsystem, its effectiveness depends on the

A. ability of the internal audit staff to maintain it.

B. adequacy of the computer system.

C. proper implementation by management.

D. competency and dependability of the people using it.

7. To comply with auditingstandards, the auditor need not be concerned with all areas of internal control that apply to management. Theauditor's primary concerns are with thesystem's ability to

A. provide reliable data and safeguard assets.

B. maintain reliable control systems pertaining to financial transactions.

C. prevent and detect financial statement fraud and error.

D. promote efficiency and encourage adherence to policy.

8. The accuracy of the results of the accounting system(account balances) is heavily dependent upon the

A. accuracy of the inputs and processing(the transactions).

B. training provided to the personnel.

C. adequacy of the entitylevel controls.

D. knowledge and skills of the auditor.

9. Which of the following controls would be of concern to management but not to theauditor?

A. controls over the entry of payroll wage rates into the computer systems

B. controls over the collection of accounts receivable amounts

C. controls over the cost of inventory items as recorded in the perpetual inventory system

D. controls over health and safety guidelines compliance by employer

10. To comply with auditingstandards, the auditor need not be concerned with all areas of internal control that apply to management. Theauditor's primary concerns are with thesystem's ability to

A. prevent and detect financial statement fraud and error.

B. promote efficiency and encourage adherence to policy.

C. maintain reliable control systems pertaining to financial transactions.

D. provide reliable data and safeguard assets.

11. Which of the following controls would be of concern to management but not to theauditor?

A. controls over the entry of payroll wage rates into the computer systems

B. controls over health and safety guidelines compliance by employer

C. controls over the collection of accounts receivable amounts

D. controls over the cost of inventory items as recorded in the perpetual inventory system

12. The essence of an effectively controlled organization lies in the

A. effectiveness of its internal auditor.

B. attitude of its employees.

C. attitude of its management.

D. effectiveness of its auditor.