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

The five COSO components are Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring Activities; Profit Optimization is not a component.

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

Segregation of duties reduces the opportunity for any one individual to commit and conceal fraud or errors by dividing authorization, custody, and recordkeeping among different people.

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

SOX Section 404 requires management to assess the design and operating effectiveness of internal controls over financial reporting and have that assessment attested by the external auditor.

Question 4

A preventive control is best described as one that:

Accepted Answer

Stops errors or irregularities from occurring in the first place

Answer

Preventive controls are proactive measures designed to stop errors or fraud before they occur, such as requiring dual authorization on large payments.

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 Audit Committee, composed of independent directors, is responsible for overseeing financial reporting integrity, hiring the external auditor, and reviewing audit findings.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Internal Controls & Governance