Question 1

Internal controls can prevent, detect or correct a problem.Which of the following groups includes controls that will fulfill all three with respect to the risk of an employee stealing tools from a company warehouse?

Accepted Answer

The answer of Internal controls can prevent, detect or correct...

Question 2

PRL Corporation's internal control plan is based on the COSO framework.It includes five items: (i) conducting ongoing evaluations of internal control during the normal course of operations, (ii) hiring accountants who understand the importance of strong internal control, (iii) including a segment in new employee orientation on the importance of strong internal control, (iv) periodic employee surveys that identify new issues that require internal controls, (v) a quarterly newsletter explaining elements of the internal control plan.Based on those five items alone, which element of PRL's internal control plan is weakest?

Accepted Answer

Control activities are the weakest element in PRL Corporation's internal control plan based on the provided items. The items listed primarily focus on evaluation, communication, and hiring practices, but there is a lack of specific mention of activities that actively control or mitigate risks, such as specific procedures or controls to address identified risks.

Question 3

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.Column B is most closely related to the ___ part of the COSO framework.

Accepted Answer

Column B is related to the control activities component of the COSO framework, which is the third component. This column lists the controls that have been implemented to mitigate the identified risks.

Question 4

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item A is:

Accepted Answer

"Risk" is the best entry for Item A because the purpose of a risk/control matrix is to identify and assess risks and their corresponding controls.

Question 5

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item C is:

Accepted Answer

Item C is referring to the risk of loss due to theft or embezzlement. The best entry for this item would be either theft of inventory or employee embezzlement, as both scenarios present a risk of financial loss to the organization.

Question 6

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item B is:

Accepted Answer

The answer of Consider the following partially completed risk/control matrix...

Question 7

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item H is:

Accepted Answer

The answer of Consider the following partially completed risk/control matrix...

Question 8

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item F is:

Accepted Answer

The answer of Consider the following partially completed risk/control matrix...

Question 9

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item E is:

Accepted Answer

The answer of Consider the following partially completed risk/control matrix...

Question 10

Jared is a loan officer at a bank whose responsibilities include taking applications from prospective borrowers.Jared also makes an initial recommendation regarding each loan, although final approval requires the authorization of both a branch manager and a loan specialist at the bank's corporate headquarters.Within the context of a loan transaction, which of the following best pairs a risk with an internal control that will address the risk?

Accepted Answer

Preformatted data entry screens can help ensure that all required fields are completed, thus addressing the risk of submitting an incomplete loan application.

Question 11

A company's accountant was able to approve payment of invoices and write company checks to a family member, with whom the accountant would split the proceeds.The accountant covered up the theft with journal entries in the AIS.Which duties should be separated to prevent such problems in the future?

Accepted Answer

The authorization and recordkeeping duties should be separated to prevent this type of fraud in the future. The accountant was able to approve payments and then cover up the theft with journal entries, indicating a lack of separation of authorization and recordkeeping duties. If these duties were separated, the accountant would not have been able to both approve the payments and conceal the fraud in the AIS.

Question 12

PRL Corporation's internal control plan is based on the COSO framework.It includes five items: (i) conducting ongoing evaluations of internal control during the normal course of operations, (ii) hiring accountants who understand the importance of strong internal control, (iii) including a segment in new employee orientation on the importance of strong internal control, (iv) periodic employee surveys that identify new issues that require internal controls, (v) a quarterly newsletter explaining elements of the internal control plan.Which of the following most appropriately groups two items from PRL's plan with a component of the COSO framework?

Accepted Answer

Hiring accountants who understand the importance of strong internal control and including a segment in new employee orientation on the importance of strong internal control both relate to the control environment component of the COSO framework, which involves setting the tone at the top and ensuring that employees understand the importance of internal controls.

Question 13

Pauline was injured on the job and applied for workers' compensation insurance; she was initially authorized for eight weeks of benefits.Although her doctor released her to return to work after six weeks, Pauline did not go back to work until the full eight weeks had elapsed.Internal controls to address this situation would include: (i) insurance and bonding, (ii) internal audits.

Accepted Answer

The answer of Pauline was injured on the job and...

Question 14

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item G is:

Accepted Answer

Item G appears to involve the financing process and the potential for errors. Therefore, the best choice is either the financing process or error rates less than 5% are allowable. Both entries would be relevant controls to mitigate the risk associated with Item G.

Question 15

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.Column A is most closely related to the ___ part of the COSO framework.

Accepted Answer

Column A of the risk/control matrix is most closely related to the "objectives" component of the COSO framework, which is the second component. It relates to identifying and defining the objectives of the organization.

Question 16

Internal controls can prevent, detect or correct a problem.Which of the following groups includes controls that will fulfill all three with respect to the risk of an employee embezzling money by forging a manager's signature on a check?

Accepted Answer

Separation of duties can prevent embezzlement by ensuring no single employee has control over all aspects of a financial transaction. Internal audits can detect embezzlement by reviewing financial records and transactions for irregularities. Employee bonding can correct a problem by providing financial compensation for losses due to embezzlement.

Question 17

Consider the following partially completed risk/control matrix as you answer the questions:  Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item D is:

Accepted Answer

The answer of Consider the following partially completed risk/control matrix...

Question 18

After being laid off from his job, Dale applied for unemployment benefits.During his initial interview to establish eligibility, the interviewer explained his benefits would last no more than ten weeks; Dale later consulted the official web site and learned that, under the right circumstances, his unemployment benefits could last up to six months.Which of the following internal controls is least likely to address this situation?

Accepted Answer

Employee bonding is least likely to address this situation as it refers to insurance that protects the employer from financial loss caused by fraudulent or dishonest acts by employees. It has no direct relevance to the duration of unemployment benefits. The other options (adequate supervision, adequate documentation, and preformatted data entry screen) can help ensure that the interviewer accurately conveys information about the duration of benefits to the applicant and that the information is correctly entered into the system.

Question 19

A company controller set up a fictitious subsidiary office to which he shipped inventories and then approved the invoice for payment.The inventories were sold and the proceeds deposited to the controller's personal bank account.Which of the following internal controls would be most effective in preventing that situation?

Accepted Answer

Separation of duties is the most effective internal control to prevent this situation. By having different individuals responsible for the approval of invoices and the handling of cash, it reduces the risk of fraud and increases accountability. A conflict of interest policy may help to prevent the controller from setting up a fictitious subsidiary office, but it would not necessarily prevent him from approving the invoice for payment and depositing the proceeds to his personal bank account. Bank reconciliations and limit checks may detect fraudulent activity after it has occurred, but they do not prevent it from happening in the first place.

Question 20

When employees of the City of Fenris need supplies, they fill out a purchase requisition and send it to the city's purchasing department.The purchasing agents consolidate requisitions for similar supplies and prepare a purchase order to send to a vendor.The vendor ships the supplies directly to the purchasing department and then bills the city.Accounting clerks pay vendor invoices within thirty days.Within the context of that business process, which of the following best pairs a risk with an internal control that will address the risk?

Accepted Answer

The risk of paying for supplies that were not received can be addressed by implementing the internal control of document matching, where the purchase order, receiving report, and invoice are compared to ensure that the supplies were actually received before payment is made.

Quiz 4: Internal Controls

Internal controls can prevent, detect or correct a problem.Which of the following groups includes controls that will fulfill all three with respect to the risk of an employee stealing tools from a company warehouse?

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.Column B is most closely related to the ___ part of the COSO framework.

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item A is:

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item C is:

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item B is:

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item H is:

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item F is:

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item E is:

A company's accountant was able to approve payment of invoices and write company checks to a family member, with whom the accountant would split the proceeds.The accountant covered up the theft with journal entries in the AIS.Which duties should be separated to prevent such problems in the future?

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item G is:

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.Column A is most closely related to the ___ part of the COSO framework.

Internal controls can prevent, detect or correct a problem.Which of the following groups includes controls that will fulfill all three with respect to the risk of an employee embezzling money by forging a manager's signature on a check?

Consider the following partially completed risk/control matrix as you answer the questions: Assume the risk/control matrix is organized like the one presented in the chapter.The best entry for Item D is: