AA C Internal control

Which of these is a component of internal control?

• 1 The audit fee
• 2 The audit opinion
• 3 The control environment
• 4 The tax rate

Which control activity reduces the risk of fraud by splitting a task between two people?

• 1 A larger budget
• 2 Analytical review
• 3 Segregation of duties
• 4 Rotation of audit partners

Which is a limitation of internal control?

• 1 Controls never fail
• 2 Controls remove all risk
• 3 Management override
• 4 Controls are free

What is a walkthrough test?

• 1 Following one transaction through the system to confirm understanding
• 2 Writing the report
• 3 Confirming bank balances
• 4 Counting inventory

What is the purpose of tests of controls?

• 1 To check that controls operated effectively during the period
• 2 To find the profit
• 3 To calculate tax
• 4 To value inventory

To whom should significant deficiencies in internal control be communicated in writing?

• 1 Those charged with governance and management
• 2 Competitors
• 3 The tax authority
• 4 The public

Which statement about internal audit is correct?

• 1 It is the same as external audit
• 2 It is always required by law
• 3 It is independent of the entity and reports to the members on the financial statements
• 4 It is part of the entity and evaluates risk management, control and governance

Which of these is a typical internal audit assignment?

• 1 The opinion on the financial statements
• 2 A value for money audit
• 3 Setting the audit fee
• 4 Appointing the directors

What is a risk of outsourcing the internal audit function to the entity's external auditor?

• 1 It removes the need for an audit committee
• 2 It is cheaper
• 3 It may threaten the independence of the external auditor
• 4 It guarantees better results

Which recommendation best addresses a deficiency in which one person raises and approves purchase orders?

• 1 Remove all approval limits
• 2 Pay suppliers earlier
• 3 Separate the roles of raising and approving purchase orders
• 4 Reduce the number of suppliers