Which of the following is not implied by the definition of control?

Internal auditors need to determine the extent to which management has established adequate control criteria. For this purpose, which of the following actions may be appropriate?

1) Determining whether objectives have been accomplished 2) Using management's adequate control criteria in their evaluation 3) Working with management to develop appropriate control evaluation criteria

Which of the following statements is correct regarding corporate compensation systems and related bonuses?

A bonus system should be considered part of the control environment of an organization and should be considered in formulating a report on internal control

To avoid invalid data input, a bank added an extra number at the end of each account number and subjected the new number to an algorithm. This technique is known as:

A check digit

What technique could be used to prevent the input of alphabetic characters into an all-numeric identification number?

A format check

Which of the following aspects of the administration of a compensation program is the most important control in the long run?

A plan of job classifications based on predefined evaluation criteria

Which of the following types of control plans is particular to a specific process or subsystem, rather than related to the timing of its occurrence?

Application

What are the elements of the control environment?

Assignment of authority and responsibility. Organizational structure. Integrity and ethical values.

Which of the following is not implied by the definition of control?

Assignment of responsibility for deviations

Which of the following computerized control procedures would be most effective in ensuring that data uploaded from desktop computers to a server are complete and that no additional data are added?

Batch control totals, including control totals and hash totals

A clerk recorded a sales invoice as US $13.66 when the actual amount was US $133.66. Which control should detect this error?

Batch input totals

When comparing perpetrators who have embezzled an organization's funds with perpetrators of financial statement fraud (falsified financial statements), those who have falsified financial statements are less likely to:

Be living beyond their obvious means of support

Internal auditors have a responsibility for helping to deter fraud. Which of the following best describes how this responsibility is usually met?

By evaluating the adequacy and effectiveness of controls in light of the potential exposure or risk

An employee in the receiving department keyed in a shipment to the accounts payable system and inadvertently omitted the purchase order number. The best systems control to detect this error is:

Completeness test

Which of the following is the control component that reflects the attitude and actions of the board and management regarding the significance of control within the organization?

Control environment

Some data processing controls relate to all computer processing activities (general controls) and some relate to specific tasks (application controls). General controls include:

Controls for documenting and approving programs and changes to programs

The risks created by rapid changes in IT have NOT affected which concepts of internal control?

Cost-benefit analysis Control environment Reasonable assurance Management's responsibility

Which of the following fraudulent entries is most likely to be made to conceal the theft of an asset?

Debit expenses and credit the asset

According to COSO, which of the following is the most effective method to transmit a message of ethical behavior throughout an organization?

Demonstrating appropriate behavior by example

If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll computer application?

Department numbers

The purpose of check digit verification of an account number on an update transaction is to:

Detect a transposition of an account number entered into the system

Which of the following is considered an application input control?

Edit check

Which of the following wrongful acts committed by an employee constitutes fraud?

Embezzlement

The internal auditors' responsibility regarding fraud includes all of the following except:

Ensuring that fraud will not occur

Which of the following should the auditor recommend as the most economical point at which to correct input errors in an online system?

Entry of data into each field of a record is completed

An organization's directors, management, external auditors, and internal auditors all play important roles in creating a proper control environment. Senior management is primarily responsible for:

Establishing a proper organizational culture and specifying a system of internal control

An internal auditor suspects that a mailroom clerk is embezzling funds. In exercising due professional care, the internal auditor should:

Evaluate fraud indicators and decide whether further action is necessary

In an organization with a separate division that is primarily responsible for the prevention of fraud, the internal audit activity is responsible for:

Examining and evaluating the adequacy and effectiveness of that division's actions taken to prevent fraud

After noting some red flags, an internal auditor has an increased awareness that fraud may be present. Which of the following best describes the internal auditor's responsibility?

Expand activities to determine whether an investigation is warranted

Which of the following best describes an auditor's responsibility after noting some indicators of fraud?

Expand activities to determine whether an investigation is warranted

A key feature that distinguishes fraud from other types of crime or impropriety is that fraud always involves the:

False representation or concealment of a material fact

The most common motivation for management fraud is the existence of:

Financial pressures on the organization

Which of the following controls could be used to detect bank deposits that are recorded but never made?

Having bank reconciliations performed by a third party

Which of the following are included in the control environment described in the COSO internal control framework?

Integrity and ethical values, assignment of authority, and human resource policies

How does fraud awareness training support fraud prevention?

Limits rationalization

Internal auditors regularly evaluate controls. Which of the following best describes the concept of control as recognized by internal auditors?

Management takes action to enhance the likelihood that established goals and objectives will be achieved

Prior to issuing a final communication on a fraud investigation, the internal auditor should submit a proposed draft for review by the:

Organization's legal counsel

Which of the following is most likely to be considered an indication of possible fraud?

Rapid turnover of the organization's financial executives

When an internal auditor identifies multiple factors that have been linked with possible fraudulent conditions and suspects that fraud has taken place, the auditor should:

Recommend an investigation

An internal auditor who suspects fraud should:

Recommend an investigation if appropriate

Management can best strengthen internal control over the custody of inventory stored in an off-site warehouse by implementing:

Regular reconciliation of physical inventories to accounting records

Application control objectives do not normally include assurance that:

Review and approval procedures for new systems are set by policy and adhered to

Which of the following is most likely to be performed in the control activities component of internal control?

Segregation of duties

The internal audit activity has concluded a fraud investigation that revealed a previously undiscovered materially adverse impact on the financial position and results of operations for 2 years on which financial statements have already been issued. The chief audit executive should immediately inform:

Senior management and the board

To minimize potential financial losses associated with physical assets, the assets should be insured in an amount that is:

Supported by periodic appraisals

Which of the following is a validity check?

The computer flags any transmission for which the control field value did not match that of an existing file record

During an engagement involving a purchasing department, an internal auditor discovered that many purchases were made (at normal prices) from an office supplier whose owner was the brother of the director of purchasing. Controls were in place to restrict such purchases and no fraud appears to have been committed. In this case, the internal auditor should recommend:

The initiation of a conflict-of-interest policy

A customer's order was never filled because an order entry clerk transposed the customer identification number while entering the sales transaction into the system. Which of the following controls would most likely have detected the transposition?

Validity check

An accounts payable program posted a payable to a vendor not included in the online vendor master file. A control that would prevent this error is a:

Validity check