CIA CIA Internal Controls & Audit

Question 1

Which internal control component in the COSO framework establishes the tone at the top and influences the control consciousness of employees?

Accepted Answer

Control Environment

Answer

The Control Environment sets the foundation for all other COSO components by reflecting leadership's commitment to integrity and ethical values.

Question 2

In an internal audit, what is the primary purpose of a 'walkthrough'?

Accepted Answer

To verify that controls are designed and operating as documented

Answer

A walkthrough traces one or a few transactions through the entire process to confirm that controls are properly designed and functioning as described.

Question 3

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

Accepted Answer

Detective control

Answer

Detective controls such as reconciliations and audits identify problems that have already occurred, unlike preventive controls which stop errors before they happen.

Question 4

Segregation of duties in internal controls primarily aims to prevent which risk?

Accepted Answer

Collusion and fraud through unauthorized access and concealment

Answer

Segregation of duties separates authorization, custody, and record-keeping functions so that no single employee can commit and conceal a fraudulent act alone.

Question 5

An auditor identifies that management consistently overrides established internal controls. According to IIA standards, this should be reported as:

Accepted Answer

A significant deficiency or material weakness requiring escalation to the board

Answer

Management override of controls is a serious red flag and must be escalated to those charged with governance, such as the audit committee or board.

(CIA) Certified Industrial Accountant Practice Test

(CIA) Certified Industrial Accountant Practice Test

CIA CIA Internal Controls & Audit