The primary responsibility for establishing and maintaining internal controls rests with
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Intermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions Essentials of Investments9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie 689 solutions 1. The primary responsibility for establishing and maintaining an internal control rests with a.The external auditors b.The internal auditors c.Management and those charged with governance d.The controller or the treasurer 2.The fundamental purpose of an internal control is to a.Safeguard the resources of the organization b.Provide reasonable assurance that the objectives of the organization are achieved c.Encourage compliance with organization objectives d.Ensure the accuracy, reliability, and timeliness of information 3. Which of the following is not one of the three primary objectives of effective internal control? a.Reliability of financial reporting b.Efficiency and effectiveness of operations c.Compliance with laws and regulations d.Assurance of elimination of business risk 4.Which of the following internal control objectives would be most relevant to the audit? a.Operational objective b.Compliance objective c.Financial reporting objective d.Administrative control objective 5. Which statement is correct concerning the relevance of various types of controls to a financial audit? a. An auditor may ordinarily ignore a consideration of controls when a substantive audit approach is taken b.Controls over the reliability of financial reporting are ordinarily most directly relevant to an audit but othercontrols may also be relevant c.Controls over safeguarding of assets and liabilities are of primary importance, while controls over the reliability of financial reporting may also be relevant d.All controls are ordinarily relevant to an audit. 6. An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about the a. Efficiency of management’s decision-making process b.Appropriate prices the entity should charge for its products c. Methods of assigning production tasks to employees d. Entity’s ability to process and summarize financial data 7. In an audit of financial statements, an auditor’s primary consideration regarding an internal control activity is whether the control a. Reflects management’s philosophy and operating style b. Affects management’s financial statement assertion c.Provides adequate safeguards over access to assets d. Enhances management’s decision-making process 8. Two key concepts that underlie management’s design and implementation of internal control are: a.Costs and materiality b. Absolute assurance and costs c.Inherent limitations and reasonable assurance d.Collusion and materiality 9. Internal control can provide only reasonable assurance of achieving entity’s control objectives. One factor limiting the likelihood of achieving those objectives is that a. The auditor’s primary responsibility is the detection of fraud b.The board of directors is active and independent c.The cost of internal control should not exceed its benefits d.Management monitors internal control 10. An act of two or more employees to steal assets and cover their theft by misstating the accounting records would be referred to as: a.Collusion b.A material weakness c.A control deficiency d.A significant deficiency What is the primary role of internal controls?Internal controls are intended to prevent errors and irregularities, identify problems and ensure that corrective action is taken.
Who has final responsibility for internal controls?Although ultimate responsibility for good internal control rests with management, all employees have a role in the effective operation of internal control that has been set by management. Understanding of internal control can be enhanced by focusing on two basic aspects of internal control: objectives and techniques.
What is an auditors responsibility for internal control?The auditor is not responsible for internal controls, only for evaluating internal controls relevant to their audit objective and reporting any weaknesses. The auditor has zero power or responsibility to change internal controls so that the coach ceases his bad behavior.
Why management is responsible for internal control?Simply put, internal controls are activities or procedures designed to provide reasonable assurance that operations are “going according to plan.” Without adequate internal controls, management has little assurance that its goals and objectives will be achieved.
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