CA Internal Controls & Governance 2

Question 1

IT General Controls (ITGCs) differ from IT Application Controls in that ITGCs:

Accepted Answer

Apply broadly to the IT environment supporting multiple applications, such as access management and change management

Answer

Validate individual transactions within a specific application

Answer

Are configured by end-users in spreadsheets

Answer

Are only relevant for cloud-based systems

Question 2

Under the Three Lines of Defense model, the internal audit function represents which line?

Accepted Answer

Third line

Answer

First line

Answer

Second line

Answer

Fourth line

Question 3

Which of the following best describes a 'significant deficiency' in internal controls?

Accepted Answer

A control deficiency less severe than a material weakness, but important enough to merit attention by those charged with governance

Answer

A control that has never been tested

Answer

Any error exceeding $1,000 in a single transaction

Answer

A breach of the code of conduct by a non-executive employee

Question 4

Corporate governance principles generally require that a majority of board members be:

Accepted Answer

Independent directors with no material relationship to management

Answer

Current executives of the company

Answer

Certified Public Accountants

Answer

Shareholders owning more than 5% of outstanding shares

Question 5

Management override of internal controls is considered a significant inherent risk because:

Accepted Answer

Even well-designed controls can be circumvented by senior management, making fraud possible regardless of the control system

Answer

It is prohibited under GAAP

Answer

Override automatically triggers an SEC investigation

Answer

It only affects public companies with more than 500 employees

Question 6

A whistleblower policy is an example of which COSO component?

Accepted Answer

Information & Communication

Answer

Risk Assessment

Answer

Control Activities

Answer

Control Environment

Question 7

Which regulatory body issues auditing standards for public company auditors in the United States regarding internal controls?

Accepted Answer

PCAOB

Answer

FASB

Answer

AICPA

Answer

COSO