ch03 Student 1 According to COSO internal control is a cid 10 cid 10 A Process B Set of rules C Responsibility of employees only D Requirement only for publicly traded firms Internal control is designed to provide cid 10 A Certainty B Freedom from fraud C Reasonable assurance D Truth cid 10 cid 10 categories except cid 10 A Company operations B Legal matters C External reporting D Fraud A Truth B Accuracy C Both A and B D Neither A nor B 3 According to the COSO definition internal control should address objectives in all of the following 4 According to the COSO definition internal control should promote in financial reporting cid 10 cid 10 5 Bumble Beasley was making a presentation on internal control to a group of prospective clients Which of the following statements is the least appropriate for Bumble to make cid 10 A Responsibility for internal control should be shared throughout the organization B All companies must use the COSO definition of internal control as a guide C Internal controls are not designed specifically to prevent fraud D Part of internal control is ensuring that a company is making the best possible use of its resources cid 10 Internal control relates to an organization s achievement of objectives in three major categories All of the following are examples of at least one category except cid 10 A Promoting compliance with the Sarbanes Oxley Act B Ensuring that plant assets are listed on the balance sheet at their net book value C Developing a clear job description for each position in the company D Providing conclusive proof that fraud has occurred cid 10 Effectiveness efficiency of operations fulfilling the requirements of the Foreign Corrupt Practices Act Internal control relates to an organization s achievement of objectives in three major categories Which of the following best pairs one of the categories with a specific example cid 10 A B Effectiveness efficiency of operations listing appropriate assets at their current market value C Reliability of financial reporting fulfilling the requirements of the Foreign Corrupt Practices Act D Reliability of financial reporting listing appropriate assets at their current market value cid 10 2 6 7 8 9 Internal control relates to an organization s achievement of objectives in three major categories Which of the following best pairs one of the categories with a specific example cid 10 A Reliability of financial reporting reconciling the bank statement at least monthly B Reliability of financial reporting following the COSO internal control framework C Compliance with all known laws and regulations following the COSO internal control framework D Compliance with all known laws and regulations fulfilling the requirements of the Foreign Corrupt Practices Act cid 10 Internal control relates to an organization s achievement of objectives in three major categories Which of the following pairs gives an example of two controls that fulfill a single category cid 10 A B C D Fulfilling the requirements of the Foreign Corrupt Practices Act developing a clear job description for each position in the company Developing a clear job description for each position in the company calculating profits on the accrual basis Fulfilling the requirements of the Foreign Corrupt Practices Act calculating profits on the accrual basis Ensuring that plant assets are listed on the balance sheet at their net book value listing appropriate assets at their current market value cid 10 10 Purposes of internal control include cid 10 cid 10 A Safeguarding assets B Ensuring financial statement reliability C Promoting operational efficiency D All of the above 11 Internal control has four major purposes in organizations Ways to achieve at least one of the four include i keeping cash in a bank ii conducting a new employee orientation cid 10 A I only B II only C Both I and II D Neither I nor II cid 10 12 Internal control has four major purposes in organizations Ways to achieve at least one of the four include i requiring supervisory review of how complex transactions are recorded in the journal ii using general ledger software such as Peachtree cid 10 A I only B II only C Both I and II D Neither I nor II cid 10 13 Omar is a general manager at FRD Corporation He recently attempted to reorganize FRD from three departments of ten people each to six departments of five people each Which purpose of internal control is most likely to be impacted by the change cid 10 A Safeguarding assets B Ensuring financial statement reliability C Promoting operational efficiency D Uncovering fraud cid 10 14 Shawn is an accountant at LNT Corporation He maintains the company s accounting data on his computer s local hard drive but does not back it up on any regular schedule LNT Corporation s risk is most related to which purpose of internal control cid 10 A Safeguarding assets B Ensuring financial statement reliability C Encouraging compliance with management directives D Properly backing up data every day cid 10 15 ANF Corporation s company procedures manual is available to all employees on the corporate Because the procedures manual would be reported as an asset on the balance sheet RSP is doing a better job safeguarding its assets Because the procedures manual would be reported as an asset on the balance sheet ANF is doing a better job safeguarding its assets network while RSP Corporation distributes a hard copy of its company procedures manual to all new employees Which of the following statements is most true cid 10 A B C ANF employees are more likely to comply with management directives than RSP employees D The method of distributing the procedures manual is unlikely to be related to ensuring financial statement reliability cid 10 16 CPY Corporation replaces one third of its computers every year SLP Corporation replaces its computers when employees submit a request but no more frequently than once every four years Which of the following statements is most true cid 10 A CPY s replacement policy does a better job safeguarding assets B SLP s replacement policy does a better job safeguarding assets C D Neither replacement schedule helps achieve the internal control purpose of safeguarding assets but replacing a computer may help promote operating efficiency Neither replacement schedule helps achieve the internal control purpose of safeguarding assets because information is not an asset reported on the balance sheet cid 10 17 A well designed set of internal controls helps a