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 compensating control reduces the risk of an existing weakness by providing an alternative layer of protection when the ideal control cannot be implemented.

Question 2

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

Accepted Answer

Financial Reporting

Answer

The five COSO components are Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities — Financial Reporting is not one of them.

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

When one person can both approve and record transactions without independent oversight, this is at minimum a significant deficiency and possibly a material weakness.

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

The COSO 2017 ERM framework links risk management directly to an organization's strategy-setting and performance objectives.

Question 5

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

Accepted Answer

Management has applied controls to mitigate inherent risk

Answer

Residual risk is the exposure that persists even after controls have been applied to reduce inherent risk.

Auditing and Assurance Training Practice Test

Auditing and Assurance Training Practice Test

Auditing and Assurance Training Internal Controls and Risk Assessment 3