Certified Management Accountant Internal Controls 2

Question 1

Which type of control is designed to detect errors or fraud after they have already occurred?

Accepted Answer

Detective control

Answer

Detective controls identify errors or irregularities that have already occurred, such as reconciliations and audits.

Question 2

The Foreign Corrupt Practices Act (FCPA) requires US public companies to maintain books and records that:

Accepted Answer

Accurately and fairly reflect transactions and dispositions of assets

Answer

The FCPA's accounting provisions require companies to keep accurate books and records and maintain adequate internal controls.

Question 3

A company discovers that a single employee has been both approving purchase orders and signing checks to vendors. This is a failure of:

Accepted Answer

Segregation of duties

Answer

Segregation of duties requires that no single person controls authorization, recording, and custody of an asset across a transaction.

Question 4

Under the COSO framework, which component involves policies and procedures that help ensure management directives are executed?

Accepted Answer

Control activities

Answer

Control activities are the policies and procedures that ensure management's risk responses are carried out.

Question 5

An inherent limitation of internal controls is that they can be overridden by:

Accepted Answer

Management

Answer

Management override is a key inherent limitation because management has the authority to bypass established controls.

Certified Management Accountant Practice Test