Governance & Internal Controls Flashcards

Under the COSO framework, which component addresses an organization's ethical values and commitment to competence?

Answer: Control Environment

The Control Environment is the foundational COSO component that sets the tone through ethical values, commitment to competence, and board oversight.

An Inspector General discovers that a federal agency's control self-assessment (CSA) process consistently rates all controls as 'effective' without supporting evidence. This situation MOST likely indicates:

Answer: Tone-at-the-top deficiency in the control environment

Unsupported self-assessments that uniformly show positive results suggest leadership is not genuinely committed to honest control evaluation, reflecting a tone-at-the-top problem.

Which governance principle requires that no single individual controls all phases of a transaction from initiation to completion?

Answer: Separation of duties

Separation of duties divides key functions so no one person can initiate, approve, execute, and record a transaction, reducing fraud and error risk.

The Government Accountability Office (GAO) Standards for Internal Control in the Federal Government (Green Book) is organized around how many principles?

Answer: 17

The GAO Green Book contains 17 principles organized under the five internal control components aligned with the COSO framework.

A material weakness in internal control differs from a significant deficiency primarily because a material weakness:

Answer: Represents a reasonable possibility of a material misstatement going undetected

A material weakness is a deficiency where there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis.

Which type of internal control is BEST exemplified by requiring two signatures on checks above a certain dollar threshold?

Answer: Preventive control

Requiring dual signatures prevents unauthorized transactions from occurring in the first place, making it a preventive control.

When an IG office performs a follow-up review on prior audit recommendations, the PRIMARY governance purpose is to:

Answer: Ensure management accountability for implementing corrective actions

Follow-up reviews hold management accountable for implementing agreed-upon corrective actions, reinforcing the governance cycle of oversight and improvement.