What is the primary purpose of effective internal control in an organization?
a. Achievement of certain organizational goals.
b. Completion of a successful audit for the entity. c. Shareholder involvement in the company's success. d. Obtaining profitability and financial strength. status: correct (1.0) correct: a your answer: a feedback: Correct. Which of the following is not a major emphasis in the design of effective internal control? a. Assets are properly protected. 2
b. Duties are segregated.
c. Transactions are authorized.
d. Processes are efficient.
status: correct (1.0) correct: d your answer: d feedback: Correct. One of the major components of an organization's internal control structure includes: a. audit control risk. 3
b. the financial environment.
c. risk assessment.
d. telecommunication equipment. status: correct (1.0) correct: c your answer: c feedback: Correct. The control environment includes which of the following? a. Control activities. 4
b. Management philosophy and operating style.
c. Assessing activity level risks. d. Application level controls.
status: correct (1.0)
correct: b your answer: b feedback: Correct. The PCAOB requires auditors of public companies to perform: a. an audit on the effectiveness of internal control. 5
b. an audit of all related parties.
c. an agreed upon procedures engagement.
d. a review of 8-K filings.
status: correct (1.0) correct: a your answer: a feedback: Correct. Which one of the following will an audit of a company's internal control include? a. An engagement to perform internal audit procedures. 6
b. Implementation of key financial controls.
c. Concluding on the accuracy of the statements of cash flows.
d. Testing of management's risk assessment procedures.
status: correct (1.0) correct: d your answer: d feedback: Correct. The payroll department should be responsible for: a. authorization of new employees. 7
b. processing payroll transactions.
c. timekeeping.
d. signing payroll checks.
status: correct (1.0) correct: b your answer: b feedback: Correct.
Which of the following is an example of a type of control that may be tested?
a. Contingent liabilities are disclosed adequately. b. Property and equipment is classified as a long-term asset.
c. Purchase orders are signed by proper agents and management.
d. An undocumented review of the expense budgets. status: correct (1.0) correct: c your answer: c feedback: Correct. Which one of the following is considered adequate documentation in an internal control system? a. The accounting clerk initials the bank reconciliation. 9
b. The mailroom mails commissions checks.
c. Invoices are prepared without sequential numbering.
d. Fixed assets are assigned useful lives at random.
status: correct (1.0) correct: a your answer: a feedback: Correct. A material weakness in the design of the operation of controls discovered in an audit of internal controls results in: a. a management letter. 10
b. an unfavorable opinion. c. the firing of the auditors.
d. adjusting audit journal entries.
status: correct (1.0) correct: b your answer: b feedback: Correct.