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ACTG 313 Chapter 7+ Test Questions With
Correct Answers 100% Verified.
7-1.1 What is the name of the law that Congress passed to prevent financial statement fraud,
make financial reports more transparent, protect investors, strengthen internal controls, and
punish executives who perpetrate fraud?
a)COSO ERM Act
b)COBIT Act
c)Foreign Corrupt Practices Act
d)Sarbanes Oxley Act
e)COSO Internal Control Act - Answer✔d
7-1.2 What is the name of the law Congress passed to prevent companies from bribing foreign
officials?
a)COBIT Act
b)COSO ERM Act
c)Sarbanes Oxley Act
d)COSO Internal Control Act
e)FCPA - Answer✔e
7-2.1 The COBIT 5 framework describes best practices for the effective governance and
management of IT. It is based on five key principles of IT governance and management. Which
of the following are among the five key principles? (Check all that apply.)
a)Enabling a holistic approach
b)Coordinating multiple different frameworks
c)Covering the enterprise end-to-end
d)Integrating governance and management
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, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
e)Meeting stakeholders' needs - Answer✔a,c,e
7-2.2 Which of the following are basic principles upon which the ERM is built? (Check all that
apply.)
a)The ERM framework can manage uncertainty, but not the ability to create value.
b)Each employee must decide for himself how much uncertainty he will accept as he creates
value.
c)Companies are formed to create value for management and the government.
d)Uncertainty results in the possibility that something can positively affect the company's
ability to create value.
e)Uncertainty results in the possibility that something can negatively affect the company's
ability to create value. - Answer✔d,e
7-2.3 COSO Internal Controls has five components. COSO ERM has the same five components,
with an additional three components added. Which of the following are among the three added
components? (Check all that apply.)
a)Risk response
b)Information and communication
c)Objective setting
d)Event identification
e)Risk assessment
f)Control activities - Answer✔a,c,d
7-3.1 Which of the following are part of an internal environment? (Check all that apply.)
a)Principles of value creation
b)Management's philosophy, operating style, and risk appetite
c)Commitment to integrity, ethical values, and competence
d)Effective management to auditor communication
e)Internal control oversight by the board of directors - Answer✔b,c,e
7-3.2 Which of the following is part of an internal environment? (Check all that apply.)
a)Organizational structure
b)Commitment to risk assessment and response
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, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
c)Monitoring the achievement of management objectives
d)Methods of assigning authority and responsibility
e)Human resource standards that attract, develop, and retain competent individuals -
Answer✔a,d,e
7-3.3 Which of the following are ways that companies endorse integrity? (Check all that apply.)
a)Making a commitment to competence, and hiring employees with the necessary knowledge,
experience, training, and skills
b)Consistently rewarding achievements and giving verbal labels to both high and low producers
c)Implementing aggressive sales practices and handsomely rewarding those who achieve them
and not giving bonuses to those who underachieve
d)Requiring employees to report dishonest or illegal acts, and disciplining employees who
knowingly fail to report them
e)Actively making employees aware that favorable outcomes and reports are more important
than almost anything else
f)Developing a written code of conduct that explicitly describes honest and dishonest behaviors
- Answer✔a,d,f
7-3.4 Which of the following are Human Resources standards that attract, develop, and retain
competent employees? (Check all that apply.)
a)Rotate employee duties periodically, and require all employees to take an annual vacation.
b)Train new employees on their responsibilities, expected levels of performance and behavior,
and the company's policies and procedures.
c)Evaluate, compensate, and promote employees based more on subjective criteria than
performance.
d)Hire employees based on educational background, experience, achievements, integrity, and
meeting written job requirements.
e)Give dismissed employees weeks to find a new job before they have to leave. - Answer✔a,b,d
7-4.1 What does COSO call an incident, whether positive or negative, that affects the
implementation of an organization's strategy or the achievement of its objectives.
a)Event
b)Exploit
c)Risk appetite
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, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
d)Exposure
e)Risk - Answer✔a
7-4.2 The company objective that helps management improve decision making and monitor
company activities and performance is called:
a)Reporting objective
b)Compliance objective
c)Operations objective
d)Strategic objective - Answer✔a
7-5.1 Which of the following statements are true? (Check all that apply.)
a)Management must take an entity-wide view of risk.
b)Management must specify objectives clearly enough for risks to be identified and assessed.
c)Inherent risk is the risk that remains after management implements internal controls, or some
other response, to risk.
d)Residual risk is the susceptibility of a set of accounts or transactions to significantly control
problems in the absence of internal control.
e)Management must identify and analyze risks to determine how they should be managed. -
Answer✔a,b,e
7-5.2 According to the text, management can respond to risk in which of the following ways?
(Check all that apply.)
a)Prepare for its occurrence
b)Share it or transfer it to someone else
c)Avoid it by not engaging in the activity that produces the risk
d)Accept its likelihood and impact
e)Reduce its likelihood and impact
f)Examine its likelihood and impact - Answer✔b,c,d,e
7-5.3 Which of the following statements are true? (Check all that apply.)
a)The objective of an internal control system is to provide reasonable assurance that events do
not take place.
b)The benefits of an internal control procedure are usually easier to measure than the costs.
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ACTG 313 Chapter 7+ Test Questions With
Correct Answers 100% Verified.
7-1.1 What is the name of the law that Congress passed to prevent financial statement fraud,
make financial reports more transparent, protect investors, strengthen internal controls, and
punish executives who perpetrate fraud?
a)COSO ERM Act
b)COBIT Act
c)Foreign Corrupt Practices Act
d)Sarbanes Oxley Act
e)COSO Internal Control Act - Answer✔d
7-1.2 What is the name of the law Congress passed to prevent companies from bribing foreign
officials?
a)COBIT Act
b)COSO ERM Act
c)Sarbanes Oxley Act
d)COSO Internal Control Act
e)FCPA - Answer✔e
7-2.1 The COBIT 5 framework describes best practices for the effective governance and
management of IT. It is based on five key principles of IT governance and management. Which
of the following are among the five key principles? (Check all that apply.)
a)Enabling a holistic approach
b)Coordinating multiple different frameworks
c)Covering the enterprise end-to-end
d)Integrating governance and management
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
e)Meeting stakeholders' needs - Answer✔a,c,e
7-2.2 Which of the following are basic principles upon which the ERM is built? (Check all that
apply.)
a)The ERM framework can manage uncertainty, but not the ability to create value.
b)Each employee must decide for himself how much uncertainty he will accept as he creates
value.
c)Companies are formed to create value for management and the government.
d)Uncertainty results in the possibility that something can positively affect the company's
ability to create value.
e)Uncertainty results in the possibility that something can negatively affect the company's
ability to create value. - Answer✔d,e
7-2.3 COSO Internal Controls has five components. COSO ERM has the same five components,
with an additional three components added. Which of the following are among the three added
components? (Check all that apply.)
a)Risk response
b)Information and communication
c)Objective setting
d)Event identification
e)Risk assessment
f)Control activities - Answer✔a,c,d
7-3.1 Which of the following are part of an internal environment? (Check all that apply.)
a)Principles of value creation
b)Management's philosophy, operating style, and risk appetite
c)Commitment to integrity, ethical values, and competence
d)Effective management to auditor communication
e)Internal control oversight by the board of directors - Answer✔b,c,e
7-3.2 Which of the following is part of an internal environment? (Check all that apply.)
a)Organizational structure
b)Commitment to risk assessment and response
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
c)Monitoring the achievement of management objectives
d)Methods of assigning authority and responsibility
e)Human resource standards that attract, develop, and retain competent individuals -
Answer✔a,d,e
7-3.3 Which of the following are ways that companies endorse integrity? (Check all that apply.)
a)Making a commitment to competence, and hiring employees with the necessary knowledge,
experience, training, and skills
b)Consistently rewarding achievements and giving verbal labels to both high and low producers
c)Implementing aggressive sales practices and handsomely rewarding those who achieve them
and not giving bonuses to those who underachieve
d)Requiring employees to report dishonest or illegal acts, and disciplining employees who
knowingly fail to report them
e)Actively making employees aware that favorable outcomes and reports are more important
than almost anything else
f)Developing a written code of conduct that explicitly describes honest and dishonest behaviors
- Answer✔a,d,f
7-3.4 Which of the following are Human Resources standards that attract, develop, and retain
competent employees? (Check all that apply.)
a)Rotate employee duties periodically, and require all employees to take an annual vacation.
b)Train new employees on their responsibilities, expected levels of performance and behavior,
and the company's policies and procedures.
c)Evaluate, compensate, and promote employees based more on subjective criteria than
performance.
d)Hire employees based on educational background, experience, achievements, integrity, and
meeting written job requirements.
e)Give dismissed employees weeks to find a new job before they have to leave. - Answer✔a,b,d
7-4.1 What does COSO call an incident, whether positive or negative, that affects the
implementation of an organization's strategy or the achievement of its objectives.
a)Event
b)Exploit
c)Risk appetite
3|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
d)Exposure
e)Risk - Answer✔a
7-4.2 The company objective that helps management improve decision making and monitor
company activities and performance is called:
a)Reporting objective
b)Compliance objective
c)Operations objective
d)Strategic objective - Answer✔a
7-5.1 Which of the following statements are true? (Check all that apply.)
a)Management must take an entity-wide view of risk.
b)Management must specify objectives clearly enough for risks to be identified and assessed.
c)Inherent risk is the risk that remains after management implements internal controls, or some
other response, to risk.
d)Residual risk is the susceptibility of a set of accounts or transactions to significantly control
problems in the absence of internal control.
e)Management must identify and analyze risks to determine how they should be managed. -
Answer✔a,b,e
7-5.2 According to the text, management can respond to risk in which of the following ways?
(Check all that apply.)
a)Prepare for its occurrence
b)Share it or transfer it to someone else
c)Avoid it by not engaging in the activity that produces the risk
d)Accept its likelihood and impact
e)Reduce its likelihood and impact
f)Examine its likelihood and impact - Answer✔b,c,d,e
7-5.3 Which of the following statements are true? (Check all that apply.)
a)The objective of an internal control system is to provide reasonable assurance that events do
not take place.
b)The benefits of an internal control procedure are usually easier to measure than the costs.
4|Page
