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6/29/2020 COSO Quiz with explanation Flashcards | Quizlet
D (Correct Answer The [ 1 ] The COSO framework treats internal

COSO framework treats control as a process designed to provide
internal control as a reasonable assurance regarding the
process designed to achievement of objectives related to
provide reasonable
assurance regarding the
achievement of A. Reliability of financial reporting.
objectives related to B. Effectiveness and efficiency of
reliability of financial operations.
reporting, effectiveness C. Compliance with applicable laws and
and efficiency of regulations.
operations, and D. All of the answers are correct.
compliance with
applicable laws and
regulations.)
A (Correct Answer The [ 2 ] Which of the following statements is

control environment correct regarding corporate
includes, among other compensation systems and related
things, the element of bonuses?
human resource policies
and practices. Thus, 1. A bonus system should be considered
hiring, orientation, part of the control environment of an
training, organization and should be considered in
evaluation, counseling, formulating a report on internal control.
promotion, 2. Compensation systems are not part of
compensation, and an organization's control system and
remedial actions must be should not be reported as such.
considered by 3. An audit of an organization's
management.) compensation system should be
performed independently of an audit of
the control system over other functions
that impact corporate bonuses.
A. 1 only.
B. 2 only.
https://quizlet.com/199980165/coso-quiz-with-explanation-flash-cards/ 2/25
C. 3 only.
D. 2 and 3 only.
A (Correct Answer [ 3 ] An organization's directors,

Senior management is management, external auditors, and
primarily responsible for internal auditors all play important roles in
establishing a proper creating a proper control environment.
organizational culture Senior management is primarily
and specifying a system responsible for
of internal control.)
A. Establishing a proper organizational

culture and specifying a system of internal
control.
B. Designing and operating a control
system that provides reasonable
assurance that established objectives and
goals will be achieved.
C. Ensuring that external and internal
auditors adequately monitor the control
environment.
D. Implementing and monitoring controls
designed by the board of directors.
C (Correct Answer A [ 4 ] Internal control can provide only

limiting factor is that the reasonable assurance that the
cost of internal control organization's objectives will be met
should not exceed its efficiently and effectively. One factor
expected benefits. Thus, limiting the likelihood of achieving those
the potential loss objectives is that
associated with any
exposure or risk is
weighed against the cost A. The internal auditor's primary
to control it. Although responsibility is the detection of fraud.
the costbenefit B. The board is active and independent.
relationship is a C. The cost of internal control should not
primary criterion that
should be considered in exceed its benefits.

designing and D. Management monitors performance.
implementing internal
control, the precise
measurement of costs
and benefits usually is
not possible.)
C (Correct Answer [ 5 ] Which of the following is the control

According to the COSO component that reflects the attitude and
model for internal actions of the board and management
control, the control regarding the significance of control
environment reflects the within the organization?
attitude and actions of A. Risk assessment.
the board and B. Control activities.
management regarding C. Control environment.
the significance of D. Monitoring.
control within the
organization.)
A (Correct Answer [ 6 ] According to COSO, which of the

Through words and following is the most effective method to
actions, management transmit a message of ethical behavior
communicates its throughout an organization?
attitude toward integrity
and ethical values. In this A. Demonstrating appropriate behavior by
way, management sets example.
the tone at the top. B. Strengthening internal audit's ability to
Demonstrating deter and report improper behavior.
appropriate behavior by C. Removing pressures to meet unrealistic
example is the most targets, particularly for short-term results.
effective method to D. Specifying the competence levels for
transmit a message of every job in an organization and
ethical behavior translating
throughout an those levels to requisite knowledge and
organization.) skills.
D (Correct Answer [ 7 ] Within the COSO Internal Control -

Monitoring is the Integrated Framework, which of the
process of assessing the following components is designed to
quality of the system's ensure that internal controls continue to
performance over time. operate effectively?
It is designed to ensure
that internal controls
continue to operate A. Control environment.
effectively.) B. Risk assessment.
C. Information and communication.
D. Monitoring.
B (Correct Answer [ 8 ] According to COSO, which of the

Compliance objectives following is a compliance objective?
relate to adherence to
laws and regulations. A. To maintain adequate staffing to keep
Maintaining a safe level overtime expense within budget.
of carbon dioxide B. To maintain a safe level of carbon
emissions during dioxide emissions during production.
production is an C. To maintain material price variances
example.) within published guidelines.
D. To maintain accounting principles that
conform to GAAP.
A (Correct Answer [ 9 ] Each of the following is a method to

Evaluating internal evaluate internal controls based on the
controls based on the framework set by the Committee of
COSO framework does Sponsoring Organizations (COSO), except
not require distinguishing
economic risk from A. Distinguishing economy risk from
industry risk and industry risk and enterprise risk.
enterprise risk. B. Evaluating internal control systems that
Therefore, it is NOT a focus first on risk identification of specific
method to evaluate losses.
internal controls based C. Identifying mitigating controls to

on the COSO prevent losses.
framework.) D. Testing to determine whether the
controls are operating effectively and
have prevented losses in the past.
B (Correct Answer Risk [ 10 ] Company management completes

that remains even after event identification and analyzes the risks.
management's initial The company wishes to assess its risk after
response is residual risk.) management's response to the risk.
According to COSO, which of the
following types of risk does this situation
represent?
A. Inherent risk.
B. Residual risk.
C. Event risk.
D. Detection risk.
D (Correct Answer Risk [ 12 ] Many organizations use electronic

responses may include funds transfer to pay their suppliers
avoidance, acceptance, instead of issuing checks. Regarding the
sharing, and reduction. risks associated with issuing checks, which
By eliminating checks, of the following risk management
the organization avoids techniques does this represent?
all risk associated with
them.) A. Controlling.
B. Accepting.
C. Transferring.
D. Avoiding.
D (Correct Answer [ 15 ] Inherent risk is

Inherent risk is the risk
when management has A. A potential event that will adversely
not taken action to affect the organization.
reduce the impact or B. Risk response risk.
likelihood of an adverse C. The risk after management takes action

event. Thus, it is risk in to reduce the impact or likelihood of an
the absence of a risk adverse event.
response.) D. The risk when management has not
taken action to reduce the impact or
likelihood of an adverse event.
B (Correct Answer The [ 16 ] Which risk response reflects a

categories of risk change from acceptance to sharing?
responses under the A. An insurance policy on a manufacturing
COSO ERM model are plant was not renewed.
avoidance, retention B. Management purchased insurance on
(acceptance), reduction, previously uninsured property.
sharing, and exploitation. C. Management sold a manufacturing
If management does not plant.
insure a building, the D. After employees stole numerous
response is acceptance. inventory items, management
Ordinarily, acceptance is implemented mandatory background
based on a judgment checks on all employees.
that the cost of another
response is excessive.
However, once
management purchases
insurance, the risk is
shared with an outside
party.)
B (Correct Answer The [ 18 ] When assessing the risk associated

internal audit activity with an activity, an internal auditor should
must evaluate and
contribute to the
improvement of A. Determine how the risk should best be
governance, risk managed. B. Provide assurance on the
management, and management of the risk.
control processes using C. Update the risk management process
a systematic and based on risk exposures.

disciplined approach D. Design controls to mitigate the
(Perf. Std. 2100). identified risks.
Assurance services
involve the internal
auditor's objective
assessment of
management's risk
management activities
and the degree to which
they are effective.)
B (Correct Answer [ 19 ] Which of the following activities is

Safeguarding assets is an outside the scope of internal auditing?
operational activity and
is therefore beyond the
scope of the internal A. Evaluating risk exposures regarding
audit activity. However, compliance with policies, procedures, and
the internal audit activity contracts.
evaluates (1) risk B. Safeguarding of assets.
exposures and (2) the C. Evaluating risk exposures regarding
adequacy and compliance with laws and regulations.
effectiveness of controls D. Ascertaining the extent to which
related to the management has established criteria to
organization's determine whether objectives have been
governance, operations, accomplished.
and information
systems.)
B (Correct Answer [ 20 ] Which of the following threatens the

Assuming management's independence of an internal auditor who
responsibility for the risk had participated in the initial
management process is establishment of a risk management
a potential threat to the process?
internal audit activity's
independence. It A. Developing assessments and reports
requires a full discussion on the risk management process.

and board approval (PA B. Managing the identified risks.
21201, para. 5).) C. Evaluating the adequacy and
effectiveness of management's risk
processes.
D. Recommending controls to address the
risks identified.
B (Correct Answer Fraud [ 21 ] Which of the following wrongful acts

is defined in The IIA committed by an employee constitutes
Glossary as "any illegal fraud?
act characterized by A. Libel.
deceit, concealment, or B. Embezzlement.
violation of trust. These C. Assault.
acts are not dependent D. Harassment.
upon the threat of
violence or physical
force. Frauds are
perpetrated by parties
and organizations to
obtain money, property,
or services; to avoid
payment or loss of
services; or to secure
personal or business
advantage."
Embezzlement is the
intentional appropriation
of property entrusted to
one's care. The
embezzler converts
property to his or her
own use and conceals
the theft.)
D (Correct Answer Fraud [ 22 ] A key feature that distinguishes fraud
is defined in The IIA from other types of crime or impropriety is

Glossary as "any illegal that fraud always involves the
act characterized by A. Violent or forceful taking of property.
deceit, concealment, or B. Deceitful wrongdoing of management-
violation of trust. These level personnel.
acts are not dependent C. Unlawful conversion of property that is
upon the threat of lawfully in the custody of the perpetrator.
violence or physical D. False representation or concealment of
force." ) a material fact.
A (Correct Answer Fraud [ 23 ] One factor that distinguishes fraud

is defined in The IIA from other employee crimes is that fraud
Glossary as "any illegal involves
act characterized by
deceit, concealment, or
violation of trust. These A. Intentional deception.
acts are not dependent B. Personal gain for the perpetrator.
upon the threat of C. Collusion with a party outside the
violence or physical organization. D. Malicious motives.
force.")
D (Correct Answer [ 24 ] Which of the following statements is

Control is the principal (are) true regarding the prevention of
means of preventing fraud?
fraud. Management, in
turn, is primarily 1. The primary means of preventing fraud is
responsible for the through internal control established and
establishment and maintained by management.
maintenance of control. 2. Internal auditors are responsible for
Internal auditors are assisting in the prevention of fraud by
primarily responsible for examining and evaluating the adequacy of
preventing fraud by the internal control system.
examining and 3. Internal auditors should assess the
evaluating the adequacy operating effectiveness of fraud-related
and effectiveness of communication systems.
control. Internal auditors A. 1 only.
also should assess the B. 1 and 2 only.

operating effectiveness C. 2 only.
of fraud-related D. 1, 2, and 3.
communication systems
and practices, and they
should support fraud-
related training.)
C (Correct Answer [ 25 ] The internal audit activity's

Control is the principal responsibility for preventing fraud is to
means of preventing A. Establish internal control.
fraud. Management, in B. Maintain internal control.
turn, is primarily C. Evaluate the system of internal control.
responsible for the D. Exercise operating authority over fraud
establishment and prevention activities.
maintenance of control.
Internal auditors are
primarily responsible for
preventing fraud by
examining and
evaluating the adequacy
and effectiveness of
control.)
A (Correct Answer An [ 26 ] Internal auditors are more likely to

internal auditor's detect fraud by developing/strengthening
responsibilities for their ability to
detecting fraud include A. Recognize and question changes that
evaluating fraud occur in organizations.
indicators and deciding B. Interrogate fraud perpetrators to
whether any additional discover why the fraud was committed.
action is necessary or C. Develop internal controls to prevent
whether an investigation the occurrence of fraud.
should be D. Document computerized operating
recommended.) system programs.
C (Correct Answer An [ 27 ] An internal auditor suspects that a

internal auditor's mailroom clerk is embezzling funds. In
responsibilities for exercising due professional care, the
detecting fraud include internal auditor should
evaluating fraud A. Reassign the clerk to another
indicators and deciding department.
whether any additional B. Institute stricter controls over mailroom
action is necessary or operations.
whether an investigation C. Evaluate fraud indicators and decide
should be whether further action is necessary.
recommended.) D. Confront the clerk with the auditor's
suspicions.
B (Correct Answer [ 28 ] Which of the following policies is

Unrealistically high sales most likely to result in an environment
or production quotas conducive to the occurrence of fraud?
can be an incentive to A. Budget preparation input by the
falsify the records or employees who are responsible for
otherwise take meeting the budget.
inappropriate action to B. Unreasonable sales and production
improve performance goals.
measures so that the C. The division's hiring process frequently
quotas appear to have results in the rejection of adequately
been met.) trained applicants.
D. The application of some accounting
controls on a sample basis.
B (Correct Answer Even [ 29 ] Which of the following is most likely

the most effective to be considered an indication of possible
internal control can fraud?
sometimes be A. The replacement of the management
circumvented, perhaps team after a hostile takeover.
by collusion of two or B. Rapid turnover of the organization's
more employees. Thus, financial executives.
an auditor must C. Rapid expansion into new markets.
be sensitive to certain D. A government audit of the

conditions that might organization's tax returns.
indicate the existence of
fraud, including high
personnel turnover. In
the case of financial
executives, high turnover
may suggest a pattern of
inflation of profits to
obtain bonuses or other
benefits, to secure
advantages in the
marketplace, or to
conceal incompetence
or rash actions. )
A (Correct Answer [ 30 ] An internal auditor should be

Paying petty cash concerned about the possibility of fraud if
expenditures from cash A. Cash receipts, net of the amounts used
receipts facilitates the to pay petty cash-type expenditures, are
unauthorized removal of deposited in the bank daily.
cash before deposit. All B. The monthly bank statement
cash receipts should be reconciliation is performed by the same
deposited intact daily. employee who maintains the perpetual
Petty cash expenditures inventory records.
should be handled C. The accounts receivable subsidiary
through an imprest fund.) ledger and accounts payable subsidiary
ledger are maintained by the same
person.
D. One person, acting alone, has sole
access to the petty cash fund (except for a
provision for occasional surprise counts
by a supervisor or auditor).
B (Correct Answer Living [ 31 ] When comparing perpetrators who

beyond one's means has have embezzled an organization's funds
been linked to employee with perpetrators of financial statement

fraud (embezzlement), fraud (falsified financial statements), those
not to financial who have falsified financial statements are
statement fraud. Fraud less likely to
perpetrated for the
benefit of the A. Have experienced an autocratic
organization ordinarily management style.
benefits the wrongdoer B. Be living beyond their obvious means of
indirectly, whereas fraud support.
that is detrimental to the C. Rationalize the fraudulent behavior.
organization provides D. Use organizational expectations as
immediate, direct justification for the act.
benefits to the
employee.)
C (Correct Answer [ 32 ] Internal auditors should have

Regular comparison of knowledge about factors (red flags) that
actual results to budgets have proven to be associated with
provides feedback and is management fraud. Which of the following
a normal and necessary factors have generally not been
part of the control loop. associated with management fraud?
Ineffective control is an
indicator of possible A. Generous performance-based reward
fraud.) systems.
B. A domineering management.
C. Regular comparison of actual results
with budgets.
D. A management preoccupation with
increased financial performance.
D (Correct Answer An [ 33 ] Which of the following would

internal auditor's indicate that fraud may be taking place in
responsibilities for the a marketing department?
detection of fraud
include having sufficient
knowledge to identify A. There is no documentation for some
indicators that fraud may fairly large expenditures made to a new

have been committed; vendor.
being alert to B. A manager appears to be living a
opportunities, such as lifestyle that is in excess of what could be
control weaknesses, that provided by a marketing manager's salary.
could allow fraud to C. The control environment can best be
occur; and evaluating described as "very loose." However, this
the indicators of fraud attitude is justified by management on the
sufficiently to determine grounds that it is needed for creativity.
whether D. All of the answers are correct.
any further action is
needed or whether a
fraud investigation
should be
recommended. Among
the many such indicators
are lack of timely and
appropriate
documentation
(including information
about authorization) for
material transactions,
suspicious lifestyle
characteristics of
employees in a position
to commit fraud, and
management's failure to
display and
communicate an
appropriate attitude
toward internal control.)
A (Correct Answer Trend [ 34 ] The most appropriate trend analysis

analysis would detect an to indicate this potential fraud is
unexplained increase in
the default rate caused A. Loan default rates by loan officer.
by bogus loans.) B. Accumulation of unpaid vacation days.
C. Automobile operating expenses by

loan officer. D. Total monetary volume of
loans by loan officer.
D (Correct Answer An [ 35 ] Which of the following is an indicator

employee who refuses of increased risk of fraud? The treasurer
to take vacations and
turns down promotions A. Takes all vacations and has just
is engaging in classic accepted a promotion to vice president of
behavior that indicates finance.
the need to conceal an B. Takes no vacations and has just
ongoing fraud.) accepted a promotion to vice president of
finance.
C. Takes all vacations and has refused
promotion to vice president of finance.
D. Takes no vacations and has refused
promotion to vice president of finance.
D (Correct Answer A [ 36 ] An internal auditor is investigating

decrease in the number the performance of a division with an
of competitors during unusually large increase in sales, gross
the year is a potential margin, and profit. Which of the following
explanation for the indicators is least likely to indicate the
increase in sales and possibility of salesrelated fraud in the
profits.) division?
A. A significant portion of divisional

management's compensation is based on
reported divisional profits.
B. There is an unusually large amount of
sales returns recorded after year end.
C. The internal auditor has taken a random
sample of sales invoices but cannot
locate a shipping document for a number
of the sales transactions selected for
November and December.

D. One of the division's major competitors
went out of business during the year.
C (Correct Answer [ 37 ] The most common motivation for

Management fraud management fraud is the existence of
benefits organizations
rather than individuals, A. Vices, such as a gambling habit.
so the existence of B. Job dissatisfaction.
financial pressures is the C. Financial pressures on the organization.
most common D. The challenge of committing the
motivation. Management perfect crime.
perpetrators attempt to
make their financial
statements appear more
attractive because of the
financial pressures of
restrictive loan
covenants, a poor cash
position, loss of
significant customers,
etc.)
D (Correct Answer [ 38 ] A mediumsized regional firm

Unrestricted access to distributes packaged snack foods to
the trucks creates convenience stores. A routine inventory
opportunities for theft of has revealed significant amounts of
merchandise by the inventory missing from
drivers.) the delivery trucks. Which of the following
suggests a control weakness that may
provide an opportunity for fraud?
A. The policy and procedure manual

clearly defines allowed and prohibited
actions. B. Careful counts are made as
inventory is loaded on the trucks.

C. Access to the warehouse is restricted to
a few trusted employees.
D. Truck drivers are allowed to use the
trucks for personal reasons, including
taking them home at night, as a benefit of
employment.
B (Correct Answer A [ 39 ] Internal auditors regularly evaluate

control is any action controls. Which of the following best
taken by management, describes the concept of control as
the board, and other recognized by internal auditors?
parties to manage risk
and increase the A. Management regularly discharges
likelihood that personnel who do not perform up to
established objectives expectations.
and goals will be B. Management takes action to enhance
achieved (The IIA the likelihood that established goals and
Glossary).) objectives will be achieved.
C. Control represents specific procedures
that accountants and internal auditors
design to ensure the correctness of
processing.
D. Control procedures should be
designed from the "bottom up" to ensure
attention to detail.
A (Correct Answer [ 40 ] The requirement that purchases be

Preventive controls are made from suppliers on an approved
actions taken prior to the vendor list is an example of a
occurrence of
transactions with the A. Preventive control.
intent of stopping errors B. Detective control.
from occurring. Use of C. Corrective control.
an approved vendor list D. Monitoring control.
is a control to prevent
the use of unacceptable

suppliers.)
A (Correct Answer The [ 41 ] Internal control should follow certain

treasurer's department basic principles to achieve its objectives.
should have custody of One of these principles is the segregation
assets but should not of functions. Which one of the following
authorize or record examples does not violate the principle of
transactions. Because segregation of functions?
the assistant treasurer
reports to the treasurer, A. The treasurer has the authority to sign
the treasurer is merely checks but gives the signature block to
delegating an assigned the assistant treasurer to run the
duty related to asset checksigning machine.
custody.) B. The warehouse clerk, who has the
custodial responsibility over inventory in
the warehouse, may authorize disposal of
damaged goods.
C. The sales manager has the
responsibility to approve credit and the
authority to write off accounts.
D. The department time clerk is given the
undistributed payroll checks to mail to
absent employees.
C (Correct Answer [ 42 ] Which one of the following is most

Segregation of duties likely to be considered an internal control
among key functions is weakness?
an important control
procedure. An accounts A. The petty cash custodian has the ability
receivable clerk who is to steal petty cash. Documentation for all
permitted to approve disbursements from the fund must be
sales returns and submitted with the request for
allowances and also replenishment of the fund.
receive customer B. An inventory control clerk at a
remittances could manufacturing plant has the ability to steal
misappropriate funds one completed television set from
received and cover the inventory a year. The theft probably will
shortage by debiting never be detected.
sales returns and C. An accounts receivable clerk, who
allowances. Limited approves sales returns and allowances,
supervision is insufficient receives customer remittances and
to compensate for lack deposits them in the bank. Limited
of segregation of duties.) supervision is maintained over the
employee.
D. A clerk in the invoice processing
department fails to match a vendor's
invoice with its related receiving report.
Checks are not signed unless all
appropriate documents are attached to a
voucher.
B (Correct Answer [ 43 ] Which of the following describes the

Sequentially numbered most effective preventive control to
receipts should be ensure proper handling of cash receipt
issued to maintain transactions?
accountability for cash
collected. Such A. Have bank reconciliations prepared by
accountability should be an employee not involved with cash
established as soon as collections and then have them reviewed
possible because cash by a supervisor.
has a high inherent risk. B. One employee issues a prenumbered
Daily cash receipts receipt for all cash collections; another
should be deposited employee reconciles the daily total of
intact so that receipts prenumbered receipts to the bank
and bank deposits can deposits.
be reconciled. The C. Use predetermined totals (hash totals)
reconciliation should be of cash receipts to control posting
performed by someone routines.
independent of the cash D. The employee who receives customer
custody function.) mail receipts prepares the daily bank
deposit, which is then deposited by
another employee.
A (Correct Answer [ 44 ] Which of the following controls

Reviewing and canceling would help prevent overpaying a vendor?
the supporting
documents prevents A. Reviewing and canceling supporting
paying a vendor twice documents when a check is issued.
for the same purchase. If B. Requiring the check signer to mail the
the person who signs the check directly to the vendor.
check cancels the C. Reviewing the accounting distribution
required documents, for the expenditure.
they cannot be recycled D. Approving the purchase before
in support of a duplicate ordering from the vendor.
payment voucher.
Securing the paid
voucher file from access
by the accounts payable
clerk is another effective
control.)
C (Correct Answer To [ 45 ] A receiving department receives

ensure a fair count, the copies of purchase orders for use in
copy of the purchase identifying and recording inventory
order sent to the receipts. The purchase orders list the
receiving clerk should name of the vendor and the quantities of
not include quantities. the materials ordered. A possible error
The receiving clerk that this system could allow is
should count the items in
the shipment and A. Payment to unauthorized vendors.
prepare a receiving B. Payment for unauthorized purchases.
report. Copies are sent C. Overpayment for partial deliveries.
to inventory control D. Delay in recording purchases.
and accounts payable.)
A (Correct Answer [ 46 ] Which of the following ensures that

Shipping documents are all inventory shipments are billed to
prepared at the time of customers?

shipment. They are
prenumbered to A. Shipping documents are prenumbered
facilitate detection of and are independently accounted for and
unrecorded shipments. A matched with sales invoices.
gap in the sequence of B. Sales invoices are prenumbered and are
documents may indicate independently accounted for and traced
an irregularity. An to the sales journal.
employee outside the C. Duties for recording sales transactions
shipping department and maintaining customer account
should account for these balances are separated.
documents. Sales D. Customer billing complaints are
invoices are generated investigated by the controller's office.
by the organization's
computer system at the
same time as the
shipping documents and
should have the same
numbers. Thus, every
shipping document
should be matched with
a sales invoice to ensure
proper billing.)
A (Correct Answer The [ 47 ] An internal auditor noted that several

sequential numbering of shipments were not billed. To prevent
documents provides a recurrence of such nonbilling, the
standard control over organization should
transactions. The
numerical sequence A. Numerically sequence and
should be accounted for independently account for all controlling
by an independent party. documents (such as packing slips and
A major objective is to shipping orders) when sales journal
detect unrecorded and entries are recorded.
unauthorized B. Undertake a validity check with
transactions.) customers as to orders placed.
C. Release product for shipment only on
the basis of credit approval by the credit

manager or other authorized person.
D. Undertake periodic tests of gross
margin rates by product line and obtain
explanations of significant departures
from planned rates.
C (Correct Answer [ 48 ] To control purchasing and accounts

Before ordering an item, payable, an information system must
the purchasing include certain source documents. For a
department should have manufacturing organization, these
on hand a purchase documents should include
requisition reflecting an
authorized request by a A. Purchase orders, receiving reports, and
user department. Before vendor invoices.
a voucher is prepared B. Receiving reports and vendor invoices.
for paying an invoice, the C. Purchase requisitions, purchase orders,
accounts payable receiving reports, and vendor invoices.
department should have D. Purchase requisitions, purchase orders,
the purchase requisition, inventory reports of goods needed, and
a purchase order (to be vendor invoices.
certain the items were
indeed ordered), the
vendor's invoice, and a
receiving report (to be
certain the items were
received).)
C (Correct Answer A [ 49 ] Management can best strengthen

detective control that internal control over the custody of
will reveal, on a regular inventory stored in an offsite warehouse
basis, any discrepancies by implementing
between the inventory
records and the actual A. Reconciliations of transfer slips to/from
inventory on hand is the warehouse with inventory records.
needed. Periodic B. Increases in insurance coverage.
comparison of the C. Regular reconciliation of physical

recorded accountability inventories to accounting records.
for inventory with the D. Regular confirmation of the amount on
actual physical inventory hand with the custodian of the warehouse.
will accomplish this.)
C (Correct Answer The [ 50 ] A control likely to prevent

risk of favoritism is purchasing agents from favoring specific
increased when buyers suppliers is
have longterm
relationships with A. Requiring management's review of a
specific vendors. monthly report of the totals spent by each
Periodic rotation of buyer.
buyer assignments will B. Requiring buyers to adhere to detailed
limit the opportunity for material specifications.
any buyer to show C. Rotating buyer assignments
favoritism to a particular periodically.
supplier.) D. Monitoring the number of orders
placed by each buyer.
A (Correct Answer [ 51 ] Which of the following describes a

Welldesigned control weakness?
procedures that are set
aside at management's A. Purchasing procedures are well
discretion are not designed and are followed unless
adequate controls. otherwise directed by the purchasing
Control procedures must supervisor.
be followed consistently B. Pre-numbered blank purchase orders
to be effective. However, are secured within the purchasing
the possibility of department.
management override is C. Normal operational purchases fall in
an inherent limitation of the range from US $500 to US $1,000 with
internal control.) two signatures required for purchases
over US $1,000.
D. The purchasing agent invests in a
publicly traded mutual fund that lists the
stock of one of the organization's

suppliers in its portfolio.
THIS SET IS OFTEN IN FOLDERS WITH...
Chapter 7: Internal Control Chapter 5 Fraud
40 terms 36 terms
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6/29/2020 COSO Quiz with explanation Flashcards | Quizlet

D (Correct Answer The [ 1 ] The COSO framework treats internal

A (Correct Answer The [ 2 ] Which of the following statements is

A (Correct Answer [ 3 ] An organization's directors,

A. Establishing a proper organizational

C (Correct Answer A [ 4 ] Internal control can provide only

should be considered in exceed its benefits.

C (Correct Answer [ 5 ] Which of the following is the control

A (Correct Answer [ 6 ] According to COSO, which of the

D (Correct Answer [ 7 ] Within the COSO Internal Control -

B (Correct Answer [ 8 ] According to COSO, which of the

A (Correct Answer [ 9 ] Each of the following is a method to

internal controls based C. Identifying mitigating controls to

B (Correct Answer Risk [ 10 ] Company management completes

D (Correct Answer Risk [ 12 ] Many organizations use electronic

D (Correct Answer [ 15 ] Inherent risk is

likelihood of an adverse C. The risk after management takes action

B (Correct Answer The [ 16 ] Which risk response reflects a

B (Correct Answer The [ 18 ] When assessing the risk associated

a systematic and based on risk exposures.

B (Correct Answer [ 19 ] Which of the following activities is

B (Correct Answer [ 20 ] Which of the following threatens the

requires a full discussion on the risk management process.

B (Correct Answer Fraud [ 21 ] Which of the following wrongful acts

D (Correct Answer Fraud [ 22 ] A key feature that distinguishes fraud

is defined in The IIA from other types of crime or impropriety is

A (Correct Answer Fraud [ 23 ] One factor that distinguishes fraud

D (Correct Answer [ 24 ] Which of the following statements is

also should assess the B. 1 and 2 only.

C (Correct Answer [ 25 ] The internal audit activity's

A (Correct Answer An [ 26 ] Internal auditors are more likely to

C (Correct Answer An [ 27 ] An internal auditor suspects that a

B (Correct Answer [ 28 ] Which of the following policies is

B (Correct Answer Even [ 29 ] Which of the following is most likely

be sensitive to certain D. A government audit of the

A (Correct Answer [ 30 ] An internal auditor should be

B (Correct Answer Living [ 31 ] When comparing perpetrators who

been linked to employee with perpetrators of financial statement

C (Correct Answer [ 32 ] Internal auditors should have

D (Correct Answer An [ 33 ] Which of the following would

indicators that fraud may fairly large expenditures made to a new

A (Correct Answer Trend [ 34 ] The most appropriate trend analysis

C. Automobile operating expenses by

D (Correct Answer An [ 35 ] Which of the following is an indicator

D (Correct Answer A [ 36 ] An internal auditor is investigating

A. A significant portion of divisional

November and December.

C (Correct Answer [ 37 ] The most common motivation for

D (Correct Answer [ 38 ] A mediumsized regional firm

A. The policy and procedure manual

inventory is loaded on the trucks.

B (Correct Answer A [ 39 ] Internal auditors regularly evaluate

A (Correct Answer [ 40 ] The requirement that purchases be

the use of unacceptable

A (Correct Answer The [ 41 ] Internal control should follow certain

C (Correct Answer [ 42 ] Which one of the following is most

B (Correct Answer [ 43 ] Which of the following describes the

A (Correct Answer [ 44 ] Which of the following controls

C (Correct Answer To [ 45 ] A receiving department receives

A (Correct Answer [ 46 ] Which of the following ensures that