Certified Management Accountant Internal Controls 5

Question 1

Which document formally defines the authority, responsibility, and organizational independence of the internal audit function?

Accepted Answer

The internal audit charter

Answer

The internal audit charter establishes the purpose, authority, and responsibility of the internal audit activity as approved by the board.

Question 2

A company allows its warehouse manager to also maintain the inventory records. Which fraud is this control weakness most likely to enable?

Accepted Answer

Inventory theft and concealment

Answer

When one person controls both physical custody and the records, they can steal inventory and alter records to conceal the theft.

Question 3

According to COSO, 'information and communication' as a component of internal control primarily ensures that:

Accepted Answer

Relevant information is identified, captured, and communicated to enable control responsibilities

Answer

The information and communication component ensures that people get the right information at the right time to fulfill their control responsibilities.

Question 4

An independent bank reconciliation performed by someone with no cash handling duties is an example of a:

Accepted Answer

Detective control with segregation of duties

Answer

Bank reconciliation detects discrepancies and errors, and performing it independently from cash handlers incorporates segregation of duties.

Question 5

The Committee of Sponsoring Organizations (COSO) was formed primarily in response to which event?

Accepted Answer

The savings and loan crisis of the 1980s and the Treadway Commission report

Answer

COSO was formed in 1985 to sponsor the Treadway Commission, which studied fraudulent financial reporting following the S&L crisis.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Internal Controls 5