CA Internal Controls & Governance 3

Question 1

The COSO Enterprise Risk Management (ERM) framework added which element that distinguished it from the original COSO internal control framework?

Accepted Answer

A broader focus on strategy-setting and the pursuit of organizational objectives across the full risk spectrum

Answer

Control testing procedures

Answer

Mandatory external audit requirements

Answer

Quarterly reporting to the SEC

Question 2

In evaluating the severity of a control deficiency, which factor is most relevant?

Accepted Answer

The magnitude of the potential misstatement and the likelihood it would occur

Answer

The number of employees in the accounting department

Answer

Whether the company is publicly or privately held

Answer

The age of the accounting software in use

Question 3

Which of the following is an example of an entity-level control?

Accepted Answer

The annual code of conduct certification signed by all employees

Answer

A three-way match procedure for invoices

Answer

Daily bank reconciliations

Answer

Physical inventory counts performed quarterly

Question 4

Independence of the internal audit function is best maintained by having the Chief Audit Executive (CAE) report functionally to:

Accepted Answer

The Audit Committee of the Board

Answer

The CFO

Answer

The Controller

Answer

The CEO only

Question 5

Which of the following anti-fraud controls is considered most effective at deterring fraudulent financial reporting by senior management?

Accepted Answer

A strong, independent Audit Committee with oversight of financial reporting and the external auditor

Answer

Mandatory vacation policies for all staff

Answer

Automated password expiration policies

Answer

Requiring dual signatures on checks under $500

Question 6

Control testing that evaluates whether a control operated effectively throughout the period (not just at a point in time) is called:

Accepted Answer

Test of operating effectiveness

Answer

Walkthrough testing

Answer

Substantive testing

Answer

Design assessment

Question 7

The Dodd-Frank Act enhanced whistleblower protections in the United States by:

Accepted Answer

Offering financial awards to individuals who report securities law violations resulting in SEC enforcement actions over $1 million

Answer

Requiring companies to publish all internal audit reports publicly

Answer

Mandating that all employees attend annual fraud awareness training

Answer

Prohibiting companies from conducting background checks on new hires