GRC Internal Controls & Audit Processes 3

Question 1

In SOX compliance, which section requires management to assess and report on internal controls over financial reporting?

Accepted Answer

Section 404

Answer

SOX Section 404 mandates that management assess the effectiveness of internal controls over financial reporting annually.

Question 2

What is the primary purpose of a 'compensating control'?

Accepted Answer

To mitigate a risk when a primary control cannot be implemented

Answer

A compensating control provides alternative risk mitigation when the ideal primary control is not feasible.

Question 3

Which audit opinion indicates that financial statements are presented fairly in all material respects?

Accepted Answer

Unmodified (clean) opinion

Answer

An unmodified or clean opinion means the auditor found no material misstatements and statements conform to GAAP.

Question 4

The concept of 'materiality' in auditing refers to:

Accepted Answer

The significance of an error or misstatement that could influence users' decisions

Answer

Materiality defines the threshold above which misstatements could reasonably influence decisions of financial statement users.

Question 5

Which of the following is an example of an application control?

Accepted Answer

Automated input validation that rejects non-numeric values in a numeric field

Answer

Application controls are automated controls built into software, such as input validation routines.

(GRC) Governance, Risk, and Compliance Certification Practice Test