COSO TEST QUESTIONS AND ANSWERS
According to COSO, there are 5 components to the Internal Control framework:
- ANSWER Control Environment - "tone at the top"
Risk Assessment
Control Activities
Information and Communication
Monitoring
Control Environment - "tone at the top" (9) - ANSWER a. Management
integrity and ethical values
b. Board of directors
c. Management's philosophy and operating style
d. Organizational structure and clear lines of authority
e. Financial reporting competencies
f. Authority and responsibility
, g. Human resources, appropriate hiring and background checks
h. The control environment is the leading component.
i. Publicly-traded companies are required to have audit committees
The audit committee (5) - ANSWER acts as liaison between the internal
auditors and management, and the external auditors and management. The audit
committee resolves audit conflicts
hires/fires the external auditors and negotiates the audit fee
resolves disputes brought to the audit committee by both the internal and
external auditors (auditors should take problems and disagreements to the audit
committee, not to management)
approves any non-audit services provided by the external auditor
oversees the confidential fraud hotline used by client employees to report fraud
Risk Assessment (3) - ANSWER -the extent to which a client manages its own
business risk using the COSO's ERM system
-the ability of the client to perform its own risk assessment
-the ability of the client to apply the iceberg principle.
According to COSO, there are 5 components to the Internal Control framework:
- ANSWER Control Environment - "tone at the top"
Risk Assessment
Control Activities
Information and Communication
Monitoring
Control Environment - "tone at the top" (9) - ANSWER a. Management
integrity and ethical values
b. Board of directors
c. Management's philosophy and operating style
d. Organizational structure and clear lines of authority
e. Financial reporting competencies
f. Authority and responsibility
, g. Human resources, appropriate hiring and background checks
h. The control environment is the leading component.
i. Publicly-traded companies are required to have audit committees
The audit committee (5) - ANSWER acts as liaison between the internal
auditors and management, and the external auditors and management. The audit
committee resolves audit conflicts
hires/fires the external auditors and negotiates the audit fee
resolves disputes brought to the audit committee by both the internal and
external auditors (auditors should take problems and disagreements to the audit
committee, not to management)
approves any non-audit services provided by the external auditor
oversees the confidential fraud hotline used by client employees to report fraud
Risk Assessment (3) - ANSWER -the extent to which a client manages its own
business risk using the COSO's ERM system
-the ability of the client to perform its own risk assessment
-the ability of the client to apply the iceberg principle.
