Chapter 10 AIS

COSO identified five interrelated components of internal control. Which of the following is NOT one of those​ five?

internal control policies

To achieve effective segregation of​ duties, certain functions must be separated. Which of the following is NOT a correct listing of systems duties that must be​ segregated?

​authorization, data​ storage, data output

Which of the following statements is​ true?

COSO's internal control integrated framework has been widely accepted as the authority on internal controls.

All other things being​ equal, which of the following is​ true?

Preventive controls are superior to detective controls.

Which of the following statements about the control environment is​ false?

​Management's attitudes toward internal control and ethical behavior have little impact on employee beliefs or actions.

To achieve effective segregation of​ duties, certain functions must be separated. Which of the following is the correct listing of the​ accounting-related functions that must be​ segregated?

​authorization, recording, and custody

Which of the following is NOT an independent​ check?

​re-adding the total of a batch of invoices and comparing it with your first total

Which of the following is a control procedure relating to both the design and use of documents and​ records?

comparing actual physical quantities with recorded amounts

What is the correct order of the risk assessment​ steps?

identify​ threats, estimate risk and​ exposure, identify​ controls, estimate costs and benefits

Your current system is deemed to be​ 90% reliable. A major threat has been identified with an impact of​ $3 million. Two control procedures exist to deal with the threat. Implementation of control A would cost​ $100,000 and reduce the likelihood to​ 6%. Implementation of control B would cost​ $140,000 and reduce the likelihood to​ 4%. Implementation of both controls would cost​ $220,000 and reduce the likelihood to​ 2%.

Given the​ data, and based solely on an economic analysis of costs and​ benefits, what should you​ do?

Implement control B only.

.06 times 3 million + 100000 = 280,000

.04 times 3 million + 140000 = 260,000

.02 times 3 million + 220,000 = 280,000