1.0 Theory-based short answer questions

Question 1.1:

Define internal control system and briefly discuss the importance of internal control and risk management.

Question 1.2

Name 2 regulations that directly apply to governance of publicly listed companies in Australia.

Question 1.3

Which authority in the company is responsible for the system of internal control? How does it discharge its responsibility?

Question 1.4

What are five common components of internal control?

Question 1.5

Discuss the term 'Financial delegations and accountabilities' in the context of the internal control.

Question 1.6

How does the company's corporate governance practice affect its internal control system's effectiveness?

Question 1.7

Why is it necessary to review the company's internal control system?

Question 1.8

Who are stakeholders and why stakeholders are needed to be consulted in implementation of the company's corporate governance requirements?

Question 1.9

Why should company detail and document its internal control procedures in standardise formats?

Question 1.10

Establishing, maintaining and monitoring of the company's internal control procedures can be costly. What are decision criteria in deciding whether to have or not to have internal control system?

Question 1.11

Why different companies may require different corporate governance structure? Also provide at least 4 features of good corporate governance practice.

Question 1.12

What is code of conduct and why it is necessary for a company to have code of conduct?

Question 1.13

What is risk and how does risk differ from fraud?

Question 1.14

What are 3 common techniques for identifying risks? Also describe them in brief.

Question 1.15

Describe the following control measures and give at least 3 control activities under each control measure:

1. Preventive control

1. Detective control

Question 1.16

Define the term 'monitoring' in the context of the internal control.

Question 1.17

Who should review the company's internal control system and how often the review should occur?

Question 1.18

What kind of information should the internal control review reports should include?

Question 1.19

Which Australian Regulation clearly specifies that the listed company either have internal control systems or explain why internal control system is not needed?

Question 1.20

Discuss limitations of internal controls.

2.0 Practice-based discussion and evaluation questions

"Mrs Pat Thomas is the CEO of the Thomas & Co Ltd. She approached the company's external auditor, Frank Dean, regarding the role of Dean in Thomas & Co Ltd's affairs.

Assume that you are the company's internal auditor Frank Dean. Answer, with reasonable discussion and explanation, the following question raised by the CEO."

Question 2.1

Who is responsible for preparing the financial statement at year end?

Question 2.2

Why do our shareholders insist that our financial statements are accompanied by the opinion of an independent public accountant (i.e. auditor)?

Question 2.3

James Hamilton, our internal auditor, seems to duplicate the work you do as our external auditor. So, why are we employing Hamilton? Do we need an internal auditor?

Question 2.4

Why is there all this fuss about basing our financial statements on generally accepted accounting principles?

Question 2.5

Does James Hamilton, our internal auditor, need to be concerned about the accuracy of the company's record? After all, we are paying you to check and verify them.