Internal Control and Professional Ethics Quiz

Which two of the following are reasons why segregation of duties is important in an internal control system?

• It improves efficiency

• It improves the rate of detection of errors.

• It is a way of assigning roles within a large organisation

• It helps to prevent fraud.

The following are examples of computer controls which operate in the payroll system at Hana Ltd. Which TWO of the following examples are the types of computer control which illustrate for application control?

• Manual checks to ensure that timesheets are authorised before details are processed.

• Approval of new applications by a sample of users and by magagement

• Range checks on payroll processing.

• Password protection limiting access to data

ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment sets out the five components of internal control. Which THREE of the following are set out as a component of internal control within ISA 315?

• Monitoring of controls

• Control activities

• The information system relevant to financial reporting

• Human resource policies and practices.

An effective system of internal control requires segregation of basic functions. Which TWO of the following functions should ideally be segregated?

• Budgetary control

• Preparation of financial statements

• Custody or handling of assets

• Recording of transactions

Which THREE of the following are true in respect of the limitations of any system of internal control?

• Standard controls may not be designed to deal with unusual transactions

• The effectiveness of many controls rely on the integrity of those applying them

• Internal controls are only applied to material items

• The cost of implementing controls may be more expensive than the cost of any potential risk arising

Which TWO of the following statements are true regarding the controls in a small company?

• The external auditor will assess the attitudes, awareness and actions of management.

• The external auditor can rely on the controls in a small company.

• Segregation of duties is often adequate in a small company

• Evidence of the operation of controls is more likely to be available in documentary form

ICAEW qualified auditors acting in the UK are subject to which two of the following?

• ICAEW Code of Ethics

• IESBA Code of Ethics

• FRC's Ethical Standard

• The Code of Ethics set by the Government

Which TWO of the following are fundamental principles as stated in the ICAEW code of ethics?

• Independence

• Confidentiality

• Objectivity

• Professional skepticism

Which THREE of the following are valid reasons why independence and objectivity are important to the assurance profession?

• Public interest in financial information

• Credibility of published financial information

• The public's expectations of accountants

• Tradition

There are two main approaches to a code of professional ethics: rules-based ethical code and a principles-based code. Which TWO of the following statements are true?

• Ethical guidance from ICAEW is in the form of rules rather than principles

• Principles-based guidance may permit multiple correct responses in a given situation.

• Rules-based codes offer a more straightforward ethical framework, as they cover specific situations.

• A rules-based code requires a professional accountant to identify, evaluate and address threats to compliance with fundamental ethical principles