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