ABA Internal Controls & Risk Management Flashcards
6 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 ABA Internal Controls & Risk Management flashcards as text
What is the primary purpose of internal controls in a business?
Answer: To safeguard assets, ensure accurate records, and promote operational efficiency
Internal controls are policies and procedures designed to safeguard assets, ensure accuracy of financial records, and promote efficient operations.
What is 'segregation of duties' as an internal control?
Answer: Dividing financial responsibilities among multiple employees to prevent fraud
Segregation of duties divides critical financial tasks among multiple employees so no single person has complete control over a transaction, reducing fraud risk.
Which type of internal control is a bank reconciliation?
Answer: Detective control
A bank reconciliation is a detective control because it identifies discrepancies between company records and bank records after transactions have occurred.
What is the COSO framework used for?
Answer: Providing a framework for designing and evaluating internal controls
The COSO (Committee of Sponsoring Organizations) framework provides a widely used model for designing, implementing, and evaluating internal controls.
What is 'dual authorization' as an internal control?
Answer: Requiring two people to approve certain transactions before processing
Dual authorization requires two authorized individuals to approve a transaction, which reduces the risk of unauthorized or fraudulent transactions.
A company requires all employees to take mandatory vacations. What internal control purpose does this serve?
Answer: Ensuring another employee reviews the vacationing employee's work, which can uncover fraud
Mandatory vacations require another employee to perform the absent employee's duties, which can reveal fraud or irregularities that might otherwise remain hidden.