10-33 (Objective 10-3) Following are descriptions of ten internal controls.

Required

Indicate which of the five COSO internal control components is best represented by each internal control.

• 1. The companys computer systems track individual transactions and automatically accumulate transactions to create a trial balance.
• 2. The company must receive university transcripts documenting all college degrees earned before an individual can begin their first day of employment with the company.
• 3. Senior management obtains data about external events that might affect the entity and evaluates the impact of that information on its existing accounting processes.
• 4. Each quarter, department managers are required to perform a self-assessment of the departments compliance with company policies. Reports summarizing the results are to be submitted to the senior executive overseeing that department.
• 4. Each quarter, department managers are required to perform a self-assessment of the departments compliance with company policies. Reports summarizing the results are to be submitted to the senior executive overseeing that department.
• 5. Before a cash disbursement can be processed, all payee information must be verified by matching the payee to the companys approved vendor listing.
• 6. The system automatically reconciles the detailed accounts receivable subsidiary ledger to the accounts receivable general ledger account on daily basis.
• 7. The company has developed a detailed series of accounting policy and procedures manuals to help provide detailed instructions to employees about how controls are to be performed.
• 8. The company has an organizational chart that establishes the formal lines of reporting and authorization protocols.
• 9. The compensation committee reviews compensation plans for senior executives to determine if those plans create unintended pressures that might lead to distorted financial statements.
• 10. On a monthly basis, department heads review a budget to actual performance report and investigate unusual differences.
  • a. Control environment
  • b. Risk assessment
  • c. Control activities
  • d. Information and communication
  • e. Monitoring