Internal Control Frameworks

Question 1

Control Activities

Answer 1

Control activities encompass policies and procedures that ensure that management’s directives are carried out.

Question 2

Control Activities

Answer 2

Control activities, policies and procedures are designed to assure that management’s directives are followed.

Question 3

Control Envirnoment Component of Internal Control

Answer 3

• Commitment to competence.
• Organizational structure.
• Integrity and ethical values

Information and communication is a separate component of internal control

Asset Safeguarding in not one of the objects of internal control as defined by COSO

Question 4

COSO Definition of Internal Control

Answer 4

A process designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

• (1) reliability of financial reporting
• (2) effectiveness and efficiency of operations
• (3) compliance with applicable laws and regulations

Question 5

COSO Management Override

Answer 5

Management overide is a limitation for all control systems no matter how effectively designed and implemented.

Question 6

Enterprise Risk Management System

Answer 6

• Risk relates to the future that is uncertain.
• Collusion among two or more individuals can result in enterprise risk management failure.
• Enterprise risk management is subject to management override

Companies cannot avoid risk this fact results in the need to have enterprsie risk management

Question 7

Five Elements of Control Environment

Answer 7

• integrity and ethical values
• board of directors
• management
• competence
• accountability

Question 8

Goverance and Culture

Answer 8

Governance is the identification and allocation of roles, authorities, and responsibilities among stakeholders, including identifying the organization’s risk culture.

Question 9

monitoring-for-change continuum

Answer 9

1. Establish a control baseline
2. Identify Changes
3. Manage Changes
4. REvalidate control baseline

Question 10

Seven Control Environment Factors

Answer 10

• (1) integrity and ethical values
• (2) commitment to competence
• (3) human resource policies and practices
• (4) assignment of authority and responsibility
• (5) management’s philosophy and operating style
• (6) board of directors or audit committee participation
• (7) organizational structure.

Question 11

Internal Control Defined

Answer 11

COSO defines internal control as a process—effected by an entity’s board of directors, management, and other personnel—designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

• (1) reliability of financial reporting
• (2) effectiveness and efficiency of operations
• (3) compliance with applicable laws and regulations.