Internal Controls & Auditing Flashcards
7 cards from real CCS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Internal Controls & Auditing flashcards as text
Which of the following BEST describes a 'walkthrough' in the context of internal controls?
Answer: Tracing a transaction from initiation through completion to verify controls operate as described
A walkthrough involves following a single transaction end-to-end to confirm that documented controls are actually in place and functioning as described.
The Institute of Internal Auditors (IIA) Standards require that internal audit activities maintain independence from:
Answer: Activities they audit
IIA Standards require organizational independence so that internal auditors are not auditing activities for which they have operational responsibility.
A 'material weakness' in internal controls is defined as:
Answer: A significant deficiency where a reasonable possibility exists that a material misstatement will not be prevented or detected
A material weakness is a deficiency or combination of deficiencies creating a reasonable possibility that a material financial misstatement will not be prevented, detected, or corrected.
Which control activity is MOST effective in deterring collusion among employees?
Answer: Mandatory vacation and job rotation policies
Mandatory vacations and job rotations expose schemes that require continuous oversight by the perpetrator, making collusion and long-running fraud harder to conceal.
In a risk-based audit approach, audit resources are allocated based on:
Answer: Areas with the highest likelihood and impact of risk materialization
Risk-based auditing directs resources toward areas where the combination of likelihood and potential impact of risk is greatest.
Which COSO principle supports the idea that management should select and develop monitoring activities?
Answer: Monitoring Activities Principle 16
COSO's Monitoring Activities Principle 16 states that an organization selects, develops, and performs ongoing and/or separate evaluations to determine the presence and functioning of internal control.
Which best describes the purpose of an audit's 'planning phase'?
Answer: Identifying audit objectives, scope, and methodology before fieldwork begins
The planning phase establishes audit objectives, scope, risk assessment, and procedures that will guide fieldwork before testing begins.