Accounting 284 Chapter 5
One of the components of an internal control system is the control environment which refers to the
attitude employees hold regarding internal control
segregate duties
do not make one employee responsible for all parts of a process
restrict access
do not provide access to assets or information unless it is needed to fulfill assigned responsibilities
employee BLANK is often grouped into 3 categories: corruption, asset misappropriation, financial statement fraud
FRAUD
Internal controls prevent and detect all errors and fraud.
False
Which of the following is not an accurate statement about internal control?
It guarantees the management will behave ethically.
operations
Objective ensure the efficient and effective completion of work and the protection of assets
Reporting
Objective is to produce reliable and timely accounting information
A goal of the Sarbanes-Oxley Act is improving corporations' internal controls. Which of these may accomplish this goal?
-An audit committee of independent directors oversees financial matters of the company -Marketing managers must determine whether the marketing team is submitting accurate sales and expense reports -External auditors must test the effectiveness of the company's internal controls.
The Sarbanes-Oxley (SOX) Act provides increased regulations for
-corporate executives -auditors -internal controls
The principles underlying the internal control system include
-documenting procedures -establishing responsibility -independently verify -restricting access segregating duties
establish responsibilities
assign each task to only one employee in order to allow one to determine who is at fault for an error or theft
compliance
objective is to focus on adhering to laws and regulations
document procedures
prepare documents to show activities that have occurred
risk abatedment
this is not an objective
Fraudulent reporting by management includes
-improper asset valuation -recording fictitious revenues from a phantom customer -mismatching revenues and expenses
Which of the following control components are part of the framework used when analyzing an internal control system?
-risk assessment -control activities -monitoring activities -information and communication -control environment
Which of the following poses a high risk of theft because of its high volume and ease of portability?
Cash
independent verify
check others work
Which is the control component of an internal control system that refers to the attitude of employees in the organization?
control environment