Auditing and Assurance Training Internal Controls and Risk Assessment 3

Question 1

Which of the following best describes a 'compensating control'?

Accepted Answer

An alternative control that mitigates risk when the primary control is absent or weak

Answer

A control that corrects errors after detection

Answer

A control required by PCAOB for large companies

Answer

A payment made to auditors for extra work

Question 2

The five components of the COSO Internal Control framework do NOT include:

Accepted Answer

Financial Reporting

Answer

Control Environment

Answer

Risk Assessment

Answer

Monitoring Activities

Question 3

An auditor identifies that the CFO can both approve and record journal entries without any independent review. This most likely represents a:

Accepted Answer

Significant deficiency in segregation of duties

Answer

Acceptable control because the CFO is trusted

Answer

Detective control working as designed

Answer

Low-risk situation for a public company

Question 4

Enterprise Risk Management (ERM) under the COSO 2017 framework is primarily focused on:

Accepted Answer

Integrating strategy and performance with risk management

Answer

Detecting fraud in financial statements

Answer

Replacing internal audit functions

Answer

Computing financial ratios for investors

Question 5

Residual risk is best defined as the risk that remains after:

Accepted Answer

Management has applied controls to mitigate inherent risk

Answer

The auditor completes substantive testing

Answer

Materiality thresholds are set

Answer

External audit fieldwork concludes

Question 6

Under the PCAOB's AS 2201, the auditor of ICFR must obtain evidence about the operating effectiveness of controls:

Accepted Answer

Over a period of time sufficient to conclude on their effectiveness for the entire year

Answer

Only for the last month of the fiscal year

Answer

Solely through management representations

Answer

By reviewing the prior year's audit report