ABA ABA Internal Controls & Risk Management

Question 1

What is the primary purpose of internal controls in a business?

Accepted Answer

To safeguard assets, ensure accurate records, and promote operational efficiency

Answer

To increase gross profit margins

Answer

To reduce the number of employees needed

Answer

To comply with marketing regulations

Question 2

What is 'segregation of duties' as an internal control?

Accepted Answer

Dividing financial responsibilities among multiple employees to prevent fraud

Answer

Assigning all financial tasks to one trusted employee

Answer

Separating business and personal bank accounts

Answer

Filing tax returns separately from financial statements

Question 3

Which type of internal control is a bank reconciliation?

Accepted Answer

Detective control

Answer

Preventive control

Answer

Corrective control

Answer

Directive control

Question 4

What is the COSO framework used for?

Accepted Answer

Providing a framework for designing and evaluating internal controls

Answer

Calculating cost of sales for manufacturing companies

Answer

Setting federal tax regulations for businesses

Answer

Determining depreciation methods for fixed assets

Question 5

What is 'dual authorization' as an internal control?

Accepted Answer

Requiring two people to approve certain transactions before processing

Answer

Using two separate accounting software systems

Answer

Filing two copies of every financial document

Answer

Having two signatures on all customer invoices

Question 6

A company requires all employees to take mandatory vacations. What internal control purpose does this serve?

Accepted Answer

Ensuring another employee reviews the vacationing employee's work, which can uncover fraud

Answer

Employee morale improvement only

Answer

Compliance with federal labor law requirements

Answer

Reducing health insurance costs