FREE CGAP Risk-Control Frameworks Questions and Answers

Question 1

Auditors learn about internal control of an entity primarily for the following reasons:

Accepted Answer

Determining the nature, extent and timing of subsequent audit procedures to be performed.

Answer

Auditors gain an understanding of an entity's internal control system primarily to assess control risk. This assessment directly influences the audit strategy, specifically determining the nature (type), extent (quantity), and timing (when) of the substantive audit procedures that will be performed. A stronger internal control system may allow for less extensive substantive testing.

Question 2

The main factor an auditor looks at when evaluating an entity's internal controls is whether they

Accepted Answer

Affect the financial statement assertions.

Answer

When evaluating internal controls, an auditor's main concern is how these controls relate to the financial statement assertions (e.g., existence, completeness, valuation, rights and obligations). Effective controls reduce the risk of material misstatements related to these assertions, thereby impacting the auditor's assessment of control risk and the scope of substantive testing.

Question 3

Which of the following assertions regarding internal control is true?

Accepted Answer

The cost-benefit relationship is a primary criterion that should be considered in designing an internal control system.

Answer

Internal control systems should be designed with a consideration of the cost-benefit relationship. The cost of implementing and maintaining a control should not exceed the expected benefits derived from it, such as reduced risk of error or fraud. While controls are important, they are not expected to be foolproof or infinitely expensive.

Question 4

All of the following, with the exception of, are aimed to help the organization meet its goals through internal controls:

Accepted Answer

Reduction of debt financing costs.

Answer

Internal controls are designed to help an organization achieve its objectives related to the reliability of financial reporting, the effectiveness and efficiency of operations (including safeguarding assets), and compliance with applicable laws and regulations. While strong internal controls can indirectly influence a company's creditworthiness, their direct aim is not the reduction of debt financing costs.

Question 5

Which of the following is not one of internal control's five main pillars?

Accepted Answer

Human resource background checks.

Answer

The five main components of internal control, as per the COSO framework, are: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring Activities. Human resource background checks are a specific control activity within the broader 'Control Activities' component, but they are not one of the five overarching pillars themselves.

CGAP - Certified Government Auditing Professional Practice Test

CGAP - Certified Government Auditing Professional Practice Test

FREE CGAP Risk-Control Frameworks Questions and Answers