chapter 6

objectives, components, structure

A direct relationship exists between ________ which reflect what an entity is trying to achieve ________, which represent what the entity needs to do to achieve them, and the________ of the entity. (

objectives, components, structure

A direct relationship exists between _______which reflect what an entity is trying to achieve________, which represent what the entity needs to do to achieve them, and the ________________of the entity. (Enter only one word per blank.)

procedure

A policy might call for two people to sign all checks over a certain dollar amount and the ______________is the action of having two people sign a check. (

Effectiveness and efficiency of operations Compliance with applicable laws and regulations Reliability, timeliness and transparency of internal and external financial and non-financial reporting

According to COSO, a system of internal controls is designed to provide reasonable assurance about the achievement of entity objectives in which of the following categories?

describe transactions in sufficient detail to permit proper classification determine the proper time period in which transactions occurred identify and record all valid transactions

An effective accounting system establishes methods and records that will ______.

reasonable

An effective internal control system provides ______ assurance that the risk of not achieving an entity objective is reduced to an acceptable level.

Internal Control

An important role in how management meets its stewardship or agency responsibilities is played by . (Enter only one word per blank.)

control

Approvals, authorizations, verifications, reconciliations, review of operating performance, and segregation of duties are all examples of _____________ activities

Blank 1: risk Blank 2: assessment

As it relates to the external financial reporting objective, the entity's process should consider internal and external events and circumstances that may arise and adversely affect the entity's ability to initiate, authorize, record, process and report financial data consistent with management's financial statement assertions. (Enter only one word per blank.)

control

Assignment of authority and responsibility for operating activities and the establishment of reporting relationships and authorization hierarchies are part of the ______ environment principle.

Blank 1: control Blank 2: activities

Based upon its risk assessment, management determines which relevant business processes require control _______________, ___________

risk

Consideration of possible changes in the internal or external environment because changes can introduce or change risks to the entity's objectives are part of the ______ identification process.

Blank 1: risk Blank 2: identification

Consideration of possible changes in the internal or external environment because changes can introduce or change risks to the entity's objectives are part of the __________________

operations compliance

Controls that may be relevant to the audit when they have an impact on data the auditor uses to apply audit procedures include ______ controls.

nature and extent of interactions with auditors experience of members information availability

Factors that can impact the effectiveness of the board of directors or audit committee include ______.

effective

For a control system to be considered _______________________, each of the five components and relevant principles must be present and functioning, and the five components must operate together in an integrated manner.

organizational or organization

How authority and responsibility are delegated and monitored and the framework within which the entity's activities for achieving entity wide objectives are planned, executed, controlled and reviewed are defined by the entity's

auditors

How management identifies risks relevant to the preparation of financial statements, estimates their significance, assesses the likelihood of their occurrence and decides on how to manage them is most directly relevant to the ______.

Opportunities Rationalization Incentives

Identify the fraud risk factors that organizations must consider in assessing risks to the achievement of objectives.

a strong internal audit function having an effective board of directors removing performance-dependent rewards

Important components of effective internal controls for an entity include ______.

relevance

Information that is capable of making a difference in user decisions has the characteristic of ________ . (Enter only one word per blank.)

Blank 1: faithful Blank 2: representation

Information that is complete, neutral and free from error has the characteristic of ___________, ___________ (Enter only one word per b

establishing performance measures evaluating performance of internal control responsibilities implementing corrective actions related to internal control responsibilities

Management and the board of directors are responsible for ______.

board of directors audit committee

People that significantly influence the control consciousness of the entity and must take their fiduciary responsibilities seriously and actively oversee the entity's accounting and reporting policies and procedures include the ______.

management the board of directors

Responsibility for establishing mechanisms to communicate and hold individuals accountable for performance of internal control responsibilities across the organization rests with ______,

Fraud Risk

The assessment of ___________________includes consideration of incentives and pressures, opportunities and how personnel might rationalize or justify inappropriate actions.

management

The competence level for a particular job should be specified and translated into a job description that details the specific knowledge and skills required. This task should be done by ______.

information and communication entity's risk assessment monitoring activities control environment

The components of internal controls as defined by the COSO Framework are ______.

transparency timeliness reliability

The controls that are of most direct relevance to a financial statement audit are those that contribute to financial statement ______.

information technology

The extent of an entity's use of ______ can affect internal controls because this function affects the way transactions are initiated, authorized, recorded, processed and reported.

effectiveness

The integrity and ethical values of management personnel heavily influence the ______ of an entity's internal controls.

control

The policies and procedures that help ensure that management's directives are carried out and implemented to address risks identified in the risk assessment process are ______ activities.

Blank 1: risk Blank 2: assessment

The possibility of events that threaten the achievement of objectives should be considered in an entity's _______, _______________process.

COSO

The purpose of the ______ Framework is to help management better control the organization and to provide boards of directors an added ability to oversee internal control.

quality

The quality of internal control is directly related to the ______ of the personnel operating the system.

control environment

The tone of a organization is set an the control consciousness of its people is influenced by the ______,

Control Environment

The tone of an organization is set and the foundation for implementing the entity's system of internal control is established by the --------------

Blank 1: general Blank 2: application

The two broad categories of information systems controls are controls and controls.

Application controls

These apply to the processing of individual applications and help ensure the occurrence, completeness and accuracy of transaction processing.

True

True or false: An entity's mix of manual and automated controls varies with the nature and complexity of the entity's use of IT.

True

True or false: An entity's risk assessment process should consider the possibility of events that threaten the achievement of objectives.

Management

Who has the responsibility to design and maintain a system of internal control that provides reasonable assurance that assets and records are properly safeguarded, and that the entity's information system generates information that is reliable for decision making?

information processing controls segregation of duties performance reviews physical controls

commonly categorized control activities include ______.