COSO FRAMEWORK
How many principles underly the components of the COSO Framework of Internal Control?
What is 17?
Which Auditing Standard requires public company auditors to test and report on the design and effectiveness of most public companies’ internal control over financial reporting?
What is AS5?
___________ – the method by which an entity’s board of directors, management, and other personnel provide reasonable assurance about the achievement of objectives in the following categories: (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance with applicable laws and regulations.
Which of the following belongs to the definition above?
A. Material Weakness
B. Internal Control
C. Auditing
D. Monitor Activities
What is Internal Control?
_________ – a process designed by, or under the supervision of, the entity’s principal executive and principal financial officers, or persons performing similar functions, and effected by the entity’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for eternal purposes in accordance with GAAP.
Which of the following belong to the definition above?
A. ICW
B. FASB
C. ICFR
D. IASB
What is ICFR?
What section of SOX requires management of a publicly traded company to issue a report that accepts responsibility for establishing and maintaining adequate ICFR?
What is Section 404?
Which of the five components of COSO sets the tone of the organization? This component is also considered the foundation for implementing the entity’s system of internal control.
What is the "Control Environment"?
Who has the responsibility to design and maintain a system of internal control that provides reasonable assurance that assets and records are properly safeguarded, and that the entity’s information system generates information that is reliable for decision making?
Who is "Management"?
__________ – the policies and procedures that help ensure that management’s objectives are carried out.
Which of the following belongs to the above definition?
A. Internal Controls
B. Monitor Activities
C. Control Activities
D. Objectives
What is Control Activities?
________ – a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.
Which of the following belongs to the definition above?
A. Significant Deficiency
B. Control Deficiency
C. Misstatement
D. Material Weakness
What is Material Weakness?
Which two dimensions of the control deficiency must the auditor consider?
What are Likelihood and Magnitude?
Which of the five components of COSO supports the functioning of internal control and supports the other four components?
What is Information and Communication?
Which of the following best describes what Monitoring of Controls is intended to assess?
What is "The quality of internal control performance over time"?
_________ – the process of correcting a material weakness as part of management’s assessment of the effectiveness of ICFR.
Which of the following is the best fit for the definition above?
A. Management Oversight
B. Remediation
C. Walkthrough
D. Report Writing
What is Remediation?
__________– a deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis.
Which of the following best fits with the definition above?
A. Control Deficiency
B. Significant Deficiency
C. Material Deficiency
D. Lack of Controls
What is Control Deficiency?
The auditor’s disclosure about the material weakness(es) should include the following?
A. The nature of the material weakness(es).
B. Its impact on the entity’s financial reporting and its ICFR.
C. Both A & B
D. Neither A & B
What is option C?
Monitoring is a major component of the COSO Internal Control - Integrated Framework. Which of the following is NOT correct in how the company can implement the monitoring component?
A. Monitoring can be an ongoing process.
B. Monitoring can be conducted as a separate evaluation.
C. Monitoring and other audit work conducted by internal audit staff can reduce external audit costs.
D. The independent auditor can serve as part of the entity's control environment and continuous monitoring.
What is option D?
Which of the following is a tool available to the auditor for documenting the understanding of internal control?
A. The entity’s procedures manuals and organizational charts.
B. Internal control questionnaires.
C. Flowcharts.
D. All of the above.
__________ - the control environment is the set of standards, processes, and structures that provide the basis for carrying out internal control across the organization.
Which of the following belongs to the definition above?
A. Control Environment
B. Risk Environment
C. Audit Environment
D. None of the Above
What is Control Environment?
__________ – the auditor’s decision to rely on the entity’s controls, test those controls, and reduce the direct tests of the financial statements accounts.
Is the above the definition of substantive strategy or reliance strategy?
What is Reliance Strategy?
Management's Assessment Process has three steps, what are these three steps?
1. Identify financial reporting risks and related controls.
2. Consider which locations to include in the evaluation
3. Evaluate Evidence about the operating effectiveness of ICFR.
What are the five components of the COSO Internal Control Framework?
What are 1. Control Environment, 2. Entity's Risk Assessment, 3. Control Activities, 4. Information and Communication, and 5. Monitoring Activities?
What is the one type of documentation for IC that wasn't listed in the question for 400 points?
The list given included:
1. The entity's procedure manuals and organizational charts. 2. Internal control questionnaires & 3. Flowcharts.
What is "Narrative description"?
_____________ – the auditor’s decision not to rely on the entity’s controls and to audit the related financial statement accounts by relying more on substantive procedures.
Is the above a definition for Substantive Strategy or Reliance Strategy?
What is Substantive Strategy?
______– a transaction being traced by an auditor from origination through the entity’s information system until it is reflected in the entity’s financial reports.
Which of the following best fits the definition above?
A. Material Transaction
B. Transaction of Importance
C. Walkthrough
D. Reperformance
What is "Walkthrough"?
What are the five steps an auditor must perform in an Audit of ICFR?
What are - 1. Plan the audit of ICFR, 2. Identify controls to test, 3. Evaluate the design and test the operating effectiveness of selected controls, 4. Evaluate identified control deficiencies, and 5. Form an opinion on the effectiveness of ICFR.
1. Plan
2. Identify
3. Scope
4. Evaluate
5. Report