Internal Auditing Assurance & Advisory Services 4th Edition Urton L. Anderson, Michael J. Head, Sridhar Ramamoorti, Cris Riddle, Mark Salamasick, Paul J. Sobel - Solutions

What is a framework? What are the internal control frameworks recognized globally by management, independent outside accountants/auditors, and internal audit professionals?
What is residual risk?a. Impact of risk.b. Risk that is under control.c. Risk that is not managed.d. Underlying risk in the environment.
To meet waste discharge standards, a factory implements a control system designed to prevent the release of wastewater that does not meet those standards. One of the controls requires chemical analysis of the water, prior to discharge, for components specified in the permit. Is this an appropriate
The requirement that purchases be made from suppliers on an approved vendor list is an example of a:a. Preventive control.b. Detective control.c. Compensating control.d. Monitoring control.
An organization has a goal to prevent the ordering of inventory quantities in excess of its needs. One individual in the organization wants to design a control that requires a review of all purchase requisitions by a supervisor in the user department prior to submitting them to the purchasing
How does COSO define internal control?
An effective system of internal controls is most likely to detect a fraud perpetrated by a:a. Group of employees in collusion.b. Single employee.c. Group of managers in collusion.d. Single manager.
COSO is quoted in this chapter as follows: “…internal auditors provide assurance and advisory support to management on internal control…the internal audit function includes evaluating the adequacy and effectiveness of controls in responding to risks within the organization’s oversight,
What are objectives? What three categories of objectives are set forth in the COSO framework?
The control that would most likely ensure that payroll checks are written only for authorized amounts is to:a. Conduct periodic floor verification of employees on the payroll.b. Require the return of undelivered checks to the cashier.c. Require supervisory approval of employee time cards.d.
An internal auditor plans to conduct an audit of the adequacy of controls over investments in new financial instruments. Which of the following would not be required as part of such an engagement?a. Determine whether policies exist that describe the risks the treasurer may take and the types of
What does the control environment comprise?
Appropriate internal control for a multinational corporation’s branch office that has a department responsible for the transfer of money requires that:a. The individual who initiates wire transfers does not reconcile the bank statement.b. The branch manager must receive all wire transfers.c.
What does risk assessment involve?
What are control activities? What types of control activities are present in a well-designed system of internal controls?
Who has primary responsibility for the monitoring component of internal control?a. The organization’s independent outside auditor.b. The organization’s internal audit function.c. The organization’s management.d. The organization’s board of directors.
What is high-quality information? Why must high-quality information be communicated?
Reasonable assurance, as it pertains to internal control, means that:a. The objectives of internal control vary depending on the method of data processing used.b. A well-designed system of internal controls will prevent or detect all errors and fraud.c. Inherent limitations of internal control
When are monitoring activities most effective? Who performs monitoring activities? What distinguishes separate evaluations from ongoing monitoring activities?
Which of the following best exemplifies a control activity referred to as independent verification?a. Reconciliation of bank accounts by someone who does not handle cash or record cash transactions.b. Identification badges and security codes used to restrict entry to the production facility.c.
What are the 17 principles of internal control defined by COSO?
COSO’s Internal Control Framework consists of five internal control components and 17 principles for achieving effective internal control. Which of the following is/are (a) principle(s)?I. The organization demonstrates a commitment to integrity and ethical values.II. Monitoring activities.III. A
The risk assessment component of internal control involves the:a. Independent outside auditor’s assessment of residual risk.b. Internal audit function’s assessment of control deficiencies.c. Organization’s identification and analysis of the risks that threaten the achievement of its
What responsibilities do the following groups of people have regarding internal control?■ Management.■ The board of directors.■ Internal auditors.■ Others in the organization.■ The independent outside auditor.
What does “limitations of internal control” mean? Provide examples of limitations that are inherent to internal control.
When assessing the risk associated with an activity, an internal auditor should:a. Determine how the risk should best be managed.b. Provide assurance on the management of the risk.c. Update the risk management process based on risk exposures.d. Design controls to mitigate the identified risks.
What is inherent risk? What is controllable risk? What is residual risk?
Determining that engagement objectives have been met is ultimately the responsibility of the:a. Internal auditor.b. Audit committee.c. Internal audit supervisor.d. CAE.
How does internal auditors’ perspective of internal control differ from management’s perspective?
An adequate system of internal controls is most likely to detect an irregularity perpetrated by a:a. Group of employees in collusion.b. Single employee.c. Group of managers in collusion.d. Single manager.
How do entity-level controls differ from process-level and transaction-level controls?
What is a key control? What is a secondary control? What is a compensating control?
What are the two broad types of information systems (technology) controls?
How is the system of internal controls evaluated?

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