ACCT 3200 MC CH.6

The 2013 COSO Report identifies five components for an effective internal control system. Which of those five includes the methods used to record, process, summarize, and report a company's transactions? A. Control procedures B. Control environment C. Control activities D. Information and communication

A. Control procedures

This term describes the policies, plans, and procedures implemented by a firm to protect the assets of the organization: A. Internal control B. SAS No. 94 C. Risk assessment D. Monitoring

A. Internal Control

Which one of the following would be most effective in deterring the commission of fraud? A. Policies of strong internal control, segregation of duties, and requiring employees to take vacations B. Policies of strong internal control and punishments for unethical behavior C. Employee training, segregation of duties, and punishment for unethical behavior D. Hiring ethical employees, employee training, and segregation of duties

A. Policies of strong internal control, segregation of duties, and requiring employees to take vacations

Which of the following is not one of the components of the 2017 COSO Enterprise Risk Management: Aligning Risk with Strategy and Performance Framework: A. Risk and Compliance B. Risk, Strategy, and Objective Setting C. Monitoring Enterprise Risk Management Performance D. Risk in Execution

A. Risk and Compliance

Which of the following would a manager most likely use to organize and evaluate corporate governance structure? A. The 2013 COSO Internal Control Integrated Framework B. The 2017 COSO Enterprise Management - Aligning Risk with Strategy and Performance Framework C. The Sarbanes - Oxley Act of 2002 D. COBIT

A. The 2013 COSO Internal Control-Integrated Framework

COSO recommends that firms to determine wither they should implement a specific control. A. Use cost - benefit analysis B. Conduct a risk assessment C. Consult with the internal auditors D. Identify objectives

A. Use cost-benefit analysis

Segregation of duties is a fundamental concept in an effective system of internal control. But, the internal auditor must be aware that this safeguard can be compromised through: A. lack of training of employees B. collusion among employees C. irregular employee reviews D. absence of internal auditing

B. Collusion among employees

Which of the following is not one of the four objectives of an internal control system? A. Safeguard assets B. Promote firm profitability C. Promote operational efficiency D. Encourage employees to follow managerial policies

B. Promote Firm Profitability

Which of the following is not one of the three additional components that was added in the 2004 COSO Enterprise Risk Management-Integrated Framework? A. Objective setting B. Risk assessment C. Event identification D. Risk response

B. Risk Assessment

If the same employee is responsible for authorizing a business transaction and recording the transaction in the accounting records, this indicates a weakness in which element of a company's internal control system? A. A good audit trail B. Separation of duties C. Internal review of controls D. Competent employees

B. Separation of duties

Which of the following would a manager most likely use for risk assessment across the organization? A. The 2013 COSO Internal Control - Integrated Framework B. The 2017 COSO Enterprise Risk Management - Aligning Risk with Strategy and Performance Framework C. The Sarbanes - Oxley Act of 2002 D. COBIT

B. The 2017 COSO Enterprise Risk Management-Aligning Risk with Strategy and Performance Framework

The Enterprise Risk Management (ERM) framework in the 2004 COSO Report was based on the 1992 COSO report and adds three additional components for an effective internal control system. Which of the following is not one of those three? A. Objective setting B. Event identification C. Control assessment E. Risk response

C. Control assessment

Which of these is NOT one of the three major types of controls? A. Preventive B. Corrective C. Objective D. Detective

C. Objective

Which one of the following forms of audit is most likely to involve a review of an entity's performance of specific activities in comparison to organizational specific objectives? A. Information system audit B. Financial audit C. Operational audit D. Compliance audit

C. Operational Audit

Separation of duties is an important control activity. If possible, managers should assign which of the following three functions to different employees? A. Analysis, authorizing, transactions B. Custody, monitoring, detecting C. Recording, authorizing, custody D. Analysis, recording, transactions

C. Recording, Authorizing, Custody

Section 404 affirms that management is responsible for establishing and maintaining an adequate internal control structure. This section may be found in which of the following? A. The 2013 COSO Internal Control - Integrated Framework B. The 2017 COSO Enterprise Risk Management - Aligning Risk with Strategy and Performance Framework C. The Sarbanes - Oxley Act of 2002 D. COBIT

C. The Sarbanes-Oxley Act of 2002

A general rule that should be followed when developing control procedures for a company's assets is: A. The cost of the control procedure will likely exceed the procedure's benefit B. The procedure should not be designed and implemented unless an asset's cost exceeds $5,000 C. The more liquid an asset is, the greater the risk of its misappropriation D. The procedure should not be designed and implemented in situations where a risk assessment has been previously performed

C. The more liquid an asset is, the greater the risk of its misappropriation

Regarding the cost-benefit concept, which of the following statements is true? A. Every control procedure that offers benefits to a company should be implemented into the company's system B. An optimal internal control package is developed for a company's system by implementing a standardized package of control procedures C. A control procedure is considered cost effective if it can be determined that the cost of operating the procedure will be cheaper in the current period compared to the previous period D. A control procedure is considered cost effective when its anticipated benefits exceed its anticipated costs

D. A control procedure is considered cost effective when its anticipated benefits exceed its anticipated costs

A control procedure that may be established within the sales department of a company's marketing subsystem is the addition of the sales invoice amounts before these invoices are sent to the information processing subsystem. This control total of invoice amounts is called a: A. Checksum B. Random total check C. Redundant control amount D. Batch control total

D. Batch control total

An internal control system should consist of five components. Which of the following is not one of those five components? A. The control environment B. Risk assessment C. Monitoring D. Performance evaluation

D. Performance Evaluation

When management of the sales department has the opportunity to override the system of internal controls of the accounting department, a weakness exists in: A. Risk management B. information and communication C. monitoring D. the control environments

D. The control environments

With respect to risk response strategies, which of the following would be a "risk sharing" approach? A. XYZ company enters the market as a provider of car insurance to high credit risk clients; however, they diversify their portfolio by targeting 40% of their marketing efforts to traditional "safe credit" customers. B. LGW Communications employs a series of manual and automated controls to manage inventory shrinkage (inventory going missing due to damage or theft) in an effort to keep inventory costs in line with industry standards. C. JLW Industries is a holding company with a division that specializes in high-risk offshore oil drilling. Given the recent Gulf oil spill and vicious backlash from consumers and politicians, JLW decides to divest itself of the oil drilling division. D. XYZ company is concerned that they do not have the capability to bring a new product to market, so they enter into a joint venture with ABC company; XYZ will handle design and marketing of the new product, while ABC will handle manufacturing and logistics.

D. XYZ company is concerned that they do not have the capability to bring a new product to market, so they enter into a joint venture with ABC company; XYZ will handle design and marketing of the new product, while ABC will handle manufacturing and logistics.

At a movie‑theater box office, all tickets are prenumbered. At the end of each day, the beginning ticket number is subtracted from the ending number to give the number of tickets sold. Cash is counted and compared with the number of tickets sold. Which of the following irregularities will be discovered or prevented by this procedure? A. The box office gives too much change B. The ticket taker admits his friends without a ticket C. The manager gives theater passes for personal expenses, which is against company policy D. A test check of customers entering the theater does not reconcile with ticket sales E. Tickets from a previous day are discovered in the ticket taker's stub box despite the fact that tickets are stamped "Good on Date of Purchase Only"

E. Tickets from a previous day are discovered in the ticket taker's stub box despite the fact that tickets are stamped "Good on Date of Purchase Only"