Question 1

The preventive controls within a company's internal control system:

Question 1 options:

Are controls put by the management to prevent problems from occurring

Focus on management's philosophy and operating style

Form the foundation for all of a company's other internal control components

Ignore the risk factor associated with a company's control procedures

Question 2

The component of an internal control system that concerns itself with the way a company's management assigns authority and responsibility is called

Question 2 options:

Information

Risk assessment

Control environment

Monitoring

Question 3

An ideal control is:

Question 3 options:

A control procedure that should always be implemented into a company's system due to the efficiency and effectiveness that will result from its implementation

A control procedure that is always cost effective

A control procedure that is anticipated to have the lowest possible cost in relation to its benefits

A control procedure that reduces to practically zero the risk of an error or an irregularity taking place and not being detected

Question 4

Control procedures that are designed to remedy problems discovered through detective controls are called:

Question 4 options:

Management-by-exception controls

Before-the-fact controls

Preventive controls

Corrective controls

Question 5

If the same employee is responsible for authorizing a business transaction and recording the transaction in the accounting records, this indicates a weakness in which element of a company's internal control system?

Question 5 options:

Competent employees

Separation of duties

Internal review of controls

A good audit trail

Question 6

A periodic review by internal auditors that stresses the evaluation of the efficiency and effectiveness of a department's procedures is called a (an):

Question 6 options:

Audit by exception

Financial audit

Operational audit

Management-by-exception audit

Question 7

A general rule that should be followed when developing control procedures for a company's assets is:

Question 7 options:

The more liquid an asset is, the greater the risk of its misappropriation

The procedure should not be designed and implemented in situations where a risk assessment has been previously performed

The procedure should not be designed and implemented unless an asset's cost exceeds $5,000

The cost of the control procedure will likely exceed the procedure's benefit

Question 8

The separation of duties control does not completely eliminate the possibility of embezzlement by employees

Question 8 options:

TrueFalse

Question 9

Risk assessment is an important component of an internal control system.

Question 9 options:

TrueFalse

Question 10

An organization should always attempt to implement ideal controls into its system.

Question 10 options:

TrueFalse

Question 11

For each of the statements provided, find a term on the right that best matches and place the number of that term in the blank space provided in front of the statement. A term could apply to more than one statement.

Question 11 options:

( ) Comparison of budget expenditures to actuals

( ) Encrypt laptops to make it difficult to detect what is on its hard drive if lost

( ) Establishes the tone of a company and influences the control awareness of the company's employees

( ) Physical inventory of a company's fixed assets

The policies, plans, and procedures management uses to protect company assets

1.preventive controls

2.control environment

3.internal control

4.detective controls

5.corrective control