Chapter 8,9,10

Question 1

Entity level vs. transaction level control

Answer 1

Entity level: pervasive in nature

Transaction: designed specifically to prevent or detect and correct misstatements in classes of transactions, account balances, or disclosures

Question 2

Preventive controls vs. detective controls

Answer 2

Preventive: designed to avoid errors or irregularities

Detective: to identify errors or irregularities after they have occurred so corrective action can be taken. eg reconciliation

Question 3

5 Typical controls of the business processes

Answer 3

1. proper authorization of transx and activities
2. adequate documents and records
3. physical and logical control over assets and records
4. adequate segregation of duties
5. independent checks of performance, recorded data, and actual results

Question 4

Examples of conflicting duties to be segregated

Answer 4

hiring & paying

entering & posting

Question 5

3 methods for documenting understanding of controls activities

Answer 5

1. narrative
2. flowchart
3. internal control questionnaire