CFC Internal Controls & Compliance 2

Question 1

Under COSO's Internal Control framework, which component addresses an organization's culture and values that influence employee behavior?

Accepted Answer

Control Environment

Answer

The Control Environment is the foundation of the COSO framework and encompasses the tone at the top, ethical values, and organizational culture.

Question 2

A company discovers that a single employee can both approve purchase orders and process vendor payments. This represents a failure in which control principle?

Accepted Answer

Segregation of duties

Answer

Segregation of duties requires that no single individual can both initiate and approve a transaction to prevent fraud and errors.

Question 3

Which SOX section specifically requires management to assess and report on the effectiveness of internal controls over financial reporting?

Accepted Answer

Section 404

Answer

SOX Section 404 mandates that management assess and report on the effectiveness of internal controls over financial reporting, with external auditor attestation for large accelerated filers.

Question 4

When evaluating the design effectiveness of an internal control, an auditor is primarily concerned with:

Accepted Answer

Whether the control, if operating as designed, would prevent or detect material misstatements

Answer

Design effectiveness asks whether the control, if operating as intended, is capable of preventing or detecting material misstatements.

Question 5

A company implements a detective control that compares actual expenses to budgeted amounts and investigates significant variances. This is best described as:

Accepted Answer

A variance analysis control

Answer

Variance analysis is a detective control because it identifies discrepancies after they have occurred rather than preventing them.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Internal Controls & Compliance 2