1. True/False - The Sarbanes-Oxley Act requires public companies to report annually on the state of their internal control process as it relates to the company's financial statements and disclosures.

2. Which if the following statements is false?

A. Senior management is responsible for setting the tone necessary to achieve an effective internal control environment.

B. The board of directors does not have a role in determining the effectiveness of a company's internal control environment.

C. The internal control environment is the collective result of a number of organizational initiatives, procedures, and practices.

D. To be effective, an internal control process requires a supportive internal control environment.

3. Which of the following parties does not play an important role in the internal control process?

A. Internal audit staff

B. Audit committee

C. Board of Directors

D. Maintenance staff

4. The purpose of an internal control process is to provide senior management...

A. Absolute assurance that the organization is on track to achieve its mission successfully and to eliminate the probability of surprises.

B. Reasonable assurance that the organization is on track to achieve its mission successfully and to eliminate the probability of surprises.

C. Reasonable assurance that the organization is on track to achieve its mission successfully and to minimize the probability of surprises.

D. None of the above.

5. Which one of the following statements is false?

A. Risk assessment is present and future oriented.

B. Risk assessment must be a continuous activity.

C. Business risk assessment is entity specific.

D. The allocation of scarce resources for the internal control process is independent of the entity's risk assessment.

6. Which one of the following is an example of a weak internal control activity?

A. The clerk placing purchase orders also pays vendors.

B. One bookkeeper processes the day's cash receipts, and another posts the receipts to the accounts receivable records.

C. Access to the room housing the company's central servers is limited to authorized employees. Those employees can enter the room only by using an authorized personal code.

D. Before a large invoice amount is paid, the invoice is compared to the purchase order, and the payment is authorized by the responsible manager.

7. A well-designed internal control process can be broken down into...

A. Four components consisting of the internal control environment, risk assessment, internal control activities, and information and communications.

B. Five components consisting of the internal control environment, risk assessment, internal control activities, information and communications, and monitoring.

C. Five components consisting of the internal control environment, risk assessment, internal control activities, information and communications, and an employee 401k plan.

D. Four components consisting of the internal control environment, risk assessment, internal control activities, and monitoring.

8. True/False - It is the responsibility of senior management to set the tone necessary to achieve an effective internal control environment.