Auditing and Internal Controls Flashcards

Which of the following is an example of a compensating control in a DoD environment where full segregation of duties cannot be achieved due to limited staffing?

Answer: Supervisory review of all transactions processed by one individual

A compensating control, such as supervisory review, mitigates the risk created when ideal segregation of duties cannot be implemented due to resource constraints.

Under GAGAS, how long must auditors retain documentation supporting their audit conclusions?

Answer: Five years from the report date

GAGAS requires that audit documentation be retained for a minimum of five years from the date of the audit report, unless a longer period is required by law or regulation.

In DoD financial management, what is the primary purpose of a reconciliation control?

Answer: To compare two sets of records to verify they agree and investigate differences

Reconciliation controls compare related records (e.g., DFAS records vs. property records) to identify and resolve discrepancies, reducing the risk of undetected errors.

The concept of 'reasonable assurance' in internal control means that:

Answer: Controls reduce risk to an acceptable level but cannot eliminate all risk

Reasonable assurance acknowledges that no control system can prevent all errors and fraud; controls are designed to reduce risks to an acceptable level given cost-benefit considerations.

Which DoD policy requires that all employees who certify the availability of funds be held accountable for Anti-Deficiency Act violations?

Answer: DoD FMR Volume 3, Chapter 8

DoD FMR Volume 3, Chapter 8 governs funds control and the accountability of certifying officials who confirm funds availability, including ADA violation consequences.

An auditor identifies that a DoD agency has been recording obligations in the wrong fiscal year appropriation. This finding most directly impacts which financial statement assertion?

Answer: Cutoff

The cutoff assertion addresses whether transactions are recorded in the correct accounting period; recording obligations in the wrong fiscal year is a cutoff error.

Which of the following best describes the role of the Defense Department's Voucher Examiner in the internal control framework?

Answer: Reviewing payment documents to ensure compliance before disbursement

The Voucher Examiner is a detective and preventive control who reviews supporting documentation for accuracy, completeness, and regulatory compliance before payment is made.