ABA ABA Internal Controls & Risk Management 1

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

Internal controls are policies and procedures designed to safeguard assets, ensure accuracy of financial records, and promote efficient operations.

Question 2

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

Accepted Answer

Dividing financial responsibilities among multiple employees to prevent fraud

Answer

Segregation of duties divides critical financial tasks among multiple employees so no single person has complete control over a transaction, reducing fraud risk.

Question 3

Which type of internal control is a bank reconciliation?

Accepted Answer

Detective control

Answer

A bank reconciliation is a detective control because it identifies discrepancies between company records and bank records after transactions have occurred.

Question 4

What is the COSO framework used for?

Accepted Answer

Providing a framework for designing and evaluating internal controls

Answer

The COSO (Committee of Sponsoring Organizations) framework provides a widely used model for designing, implementing, and evaluating internal controls.

Question 5

What is 'dual authorization' as an internal control?

Accepted Answer

Requiring two people to approve certain transactions before processing

Answer

Dual authorization requires two authorized individuals to approve a transaction, which reduces the risk of unauthorized or fraudulent transactions.

(ABA) Accredited Business Accountant Practice Test

(ABA) Accredited Business Accountant Practice Test

ABA ABA Internal Controls & Risk Management 1