CSCP Internal Controls & Auditing 2

Question 1

Which control framework specifically addresses internal controls over financial reporting for publicly traded companies?

Accepted Answer

COSO 2013 Framework

Answer

The COSO 2013 Internal Control – Integrated Framework is the primary standard used for evaluating internal controls over financial reporting under SOX Section 404.

Question 2

A 'detective control' in a securities firm is best exemplified by which of the following?

Accepted Answer

Monthly reconciliation of broker statements to internal records

Answer

Monthly reconciliation is a detective control because it identifies errors or irregularities after transactions have already occurred.

Question 3

Under SOX Section 404(b), which party is required to attest to the effectiveness of a public company's internal control over financial reporting?

Accepted Answer

The company's external auditor

Answer

SOX Section 404(b) requires the registered public accounting firm (external auditor) to attest to and report on management's assessment of internal controls.

Question 4

What is the primary purpose of a 'walkthrough' in an internal audit of a securities firm?

Accepted Answer

To trace a transaction from initiation through completion to verify controls operate as described

Answer

A walkthrough traces a single transaction end-to-end to confirm that documented controls exist and function as described in process narratives.

Question 5

A broker-dealer's internal audit function discovers that a trader has been executing trades just below the reporting threshold to avoid detection. This activity is known as:

Accepted Answer

Structuring

Answer

Structuring involves breaking transactions into smaller amounts specifically to evade reporting thresholds, which is illegal under the Bank Secrecy Act.

(CSCP) Certified Securities Compliance Professional Practice Test

(CSCP) Certified Securities Compliance Professional Practice Test

CSCP Internal Controls & Auditing 2