Quiz on Internal Controls and Risks

The following are examples of ‘computer controls which operate in the payroll system at ABC Ltd. For example, select the type of ‘computer control which it illustrates: Manual checks to ensure that timesheets are authorised before details are processed

• General

• Application

For each of the following statements select whether they are true or false in respect of business risk: Business risk is of no relevance to the auditor, The auditor is only concerned with audit risk

• True

• False

ISA315 states that an internal control system in an organisation consists of five components: the control environment, the entity's risk assessment process, the information system, control activities and ‘monitoring of controls. For each of the following examples, select the component which it illustrates: The process of preparing the financial statements.

• Control environment

• Information system

• Control activities

In each of the following three cases, select whether control risk is higher or lower than normal: (1) The payables ledgers is not regularly reconciled to the payables ledger control account

• Control risk is higher than normal

• Control risk is lower than normal

One of the five elements of internal controls is monitoring of controls. Which TWO of the following are activities which would be used to monitor controls

• Management's review of whether bank reconciliations are being prepared on a timely basis

• Internal auditor's evaluation of whether the sales team are following company policy regarding customer discounts

• Authorisation of purchase invoices before they are paid

• Authorisation of purchase orders by the department manager

The following are examples of ‘computer controls which operate at PQ plc. For the example, select the type of ‘computer control which it illustrates: Manual checks to ensure that input data was authorised

• General

• Application

Which TWO of the following are reasons why organisations need to have effective systems of control? To assist the organisation in

• Minimising business risks

• Maximising its profitability

• Managing its assets and liabilities

• Cutting down the time needed for the audit

• Complying with laws and regulations

According to ISA 315 which THREE of the following are respects of an entity's control environment?

• The attitude of the directors to internal controls

• The attitude of staff to internal controls

• The awareness of internal control issues in the company

• The actions of senior management in relation to internal control

The following are examples of internal controls which operate at ABC plc. For each example, select the type of control activity which it illustrates: There are two keys to the locked finance department safe: one held by the finance director and the other by the managing director

• Authorisation

• Information processing

• Physical control

Which TWO of the following will reduce password effectiveness as a means of restricting access to a computer system?

• Frequent changes of passwords

• User selection of passwords

• Automatic disconnection after failed attempts to access system

• Disciplinary offence if passwords revealed

• Displaying the password on screen