Quiz on Internal Controls

What is the fundamental purpose of internal control?

• To reduce employee turnover

• To increase efficiency

• To maximize profits

• To safeguard assets

What is the main consequence of a lack of sound internal controls?

• Higher employee morale

• Improved efficiency

• Increased profits

• Serious consequences for a company

What is the purpose of background checks as an internal control?

• To enhance employee morale

• To safeguard assets

• To improve efficiency

• To increase profits

Why is segregation of duties considered an important internal control?

• To prevent fraud

• To reduce employee turnover

• To maximize profits

• To safeguard assets

What is the purpose of user training as an internal control?

• To safeguard assets

• To ensure proper application of controls

• To increase inefficiency

• To reduce profits

What is the main purpose of internal control in an organization?

• To encourage compliance with management's directives

• To promote operational efficiency

• To ensure reliable financial statements

• To eliminate fraud

Which legislation legally requires management to assess a company's internal controls annually?

• Brown's risk taxonomy

• Sarbanes-Oxley Act

• Foreign Corrupt Practices Act

• COSO Internal Control framework

What is the primary purpose of the COSO Internal Control framework element 'Control Environment'?

• To establish proper storage conditions

• To ensure financial statement reliability

• To promote operational efficiency

• To set the tone at the top regarding internal control

Which type of risk exposure is related to the possibility of people making mistakes within an organization?

• Systems risk

• Legal and regulatory risk

• Operational risk

• Credit risk

What is the purpose of conducting surprise cash counts as an internal control procedure?

• To promote operational efficiency

• To ensure reliable financial statements

• To prevent fraud

• To encourage compliance with management's directives