CA Internal Controls & Governance

Question 1

Which of the following is NOT one of the five components of the COSO Internal Control – Integrated Framework?

Accepted Answer

Profit Optimization

Answer

Control Environment

Answer

Risk Assessment

Answer

Monitoring Activities

Question 2

Segregation of duties is primarily designed to prevent which type of risk?

Accepted Answer

Fraud and error through collusion or unauthorized access

Answer

Liquidity risk

Answer

Interest rate risk

Answer

Currency translation risk

Question 3

Under Sarbanes-Oxley (SOX) Section 404, management is required to:

Accepted Answer

Assess and report on the effectiveness of internal controls over financial reporting

Answer

File quarterly tax returns with the SEC

Answer

Publish an annual sustainability report

Answer

Disclose all executive compensation to the IRS

Question 4

A preventive control is best described as one that:

Accepted Answer

Stops errors or irregularities from occurring in the first place

Answer

Identifies errors after they have occurred

Answer

Corrects errors once detected

Answer

Reports control failures to senior management

Question 5

Which body is primarily responsible for overseeing a company's financial reporting and external auditor relationship in a U.S. public company?

Accepted Answer

The Audit Committee of the Board of Directors

Answer

The CFO

Answer

The Internal Audit Department

Answer

The SEC Enforcement Division

Question 6

A 'material weakness' in internal controls over financial reporting is defined as:

Accepted Answer

A deficiency where there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis

Answer

A minor clerical error in the trial balance

Answer

Any control that has not been tested during the year

Answer

An IT system outage lasting more than 24 hours

Question 7

The 'control environment' component of COSO is often referred to as the foundation of internal control because it:

Accepted Answer

Sets the tone at the top and influences the overall culture of integrity and ethical values

Answer

Establishes the physical security of assets

Answer

Defines the chart of accounts used in financial reporting

Answer

Determines the interest rates charged on intercompany loans