The following are general questions about internal control. Choose the best response.

a. Which of the following correctly describes an internal control component?

(1) Control activities set the tone of the organization.

(2) Information and communication systems have to do with managements analysis of risk.

(3) Risk assessment relates to assessing the quality of the internal control structure over time.

(4) Monitoring relates to ongoing assessment by management to determine whether controls are operating as intended.

b. Which of the following situations is not an example of an inherent limitation of internal control?

(1) A programming error in the design of an automated control allows an employee

to give himself an unauthorized pay increase.

(2) Managements failure to enforce control policies surrounding access to inventory allows employees to steal assets.

(3) A lack of physical controls over the safeguarding of assets allows an employee to

steal company assets.

(4) A fraud scheme whereby an employee orders personal goods and his supervisor,

who is in on the scheme, signs the checks to pay for those goods.

c. Which of the following factors are included in an entitys control environment?

Participation of those charged with Gevernance; Integrity and Ethical Values; Organizational Structure

(1) Yes; Yes; No

(2) Yes; Yes; Yes

(3) No; Yes; Yes

(4) Yes; No; Yes