Compliance and Auditing Internal Controls

Question 1

What are the five components of the COSO Internal Control — Integrated Framework?

Accepted Answer

Control Environment, Risk Assessment, Control Activities, Information & Communication, Monitoring

Answer

The COSO Internal Control — Integrated Framework consists of five interrelated components: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring Activities.

Question 2

What is 'segregation of duties' (SoD) as an internal control?

Accepted Answer

Separating critical business functions among different people to prevent fraud and errors

Answer

Segregation of duties is an internal control that divides key tasks and responsibilities among multiple employees to prevent any single person from having the ability to execute and conceal fraud or errors.

Question 3

Which type of control is designed to prevent errors or fraud from occurring in the first place?

Accepted Answer

Preventive control

Answer

Preventive controls are proactive controls designed to stop errors, irregularities, or fraudulent activities before they occur.

Question 4

What is the purpose of a 'compensating control' in internal control design?

Accepted Answer

To substitute for a primary control that cannot be implemented

Answer

A compensating control is an alternative control that provides an equivalent level of assurance when the primary control cannot be implemented due to operational or practical constraints.

Question 5

Which internal control activity involves comparing actual results to expected outcomes?

Accepted Answer

Analytical review

Answer

Analytical review compares actual financial or operational results to expected outcomes, budgets, or prior periods to identify significant fluctuations that may indicate errors or fraud.

Compliance and Auditing Practice Test

Compliance and Auditing Practice Test

Compliance and Auditing Internal Controls