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

ITGCs govern the overall IT environment — including logical access, program change management, and computer operations — and their effectiveness underpins the reliability of application-level controls.

Question 2

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

Accepted Answer

Third line

Answer

The third line (internal audit) provides independent assurance to the board and senior management about the effectiveness of governance, risk management, and controls established by the first and second lines.

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 significant deficiency is a control shortcoming that, while not rising to a material weakness, still warrants the attention of the audit committee due to its potential impact on financial reporting.

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

Independence is fundamental to effective board oversight; stock exchange listing rules and governance best practices require a majority of directors to be independent to avoid conflicts of interest.

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

Because management has the authority and knowledge to bypass controls, auditing standards treat management override as an inherent risk that must always be addressed, regardless of the control environment.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Internal Controls & Governance 2