Coso Test Questions
Each of the following is a method to evaluate internal controls based on the
framework set by the Committee of Sponsoring Organizations (COSO), except
A. Distinguishing economy risk from industry risk and enterprise risk.
B. Evaluating internal control systems that focus first on risk identification of specific
losses.
C. Identifying mitigating controls to prevent losses.
D. Testing to determine whether the controls are operating effectively and have
prevented losses in the past. - Answer-A
An organization's directors, management, external auditors, and internal auditors all
play important roles in creating a proper control environment. Senior management is
primarily responsible for
A. Establishing a proper organizational culture and specifying a system of internal
control.
B. Designing and operating a control system that provides reasonable assurance that
established objectives and goals will be achieved.
C. Ensuring that external and internal auditors adequately monitor the control
environment.
D. Implementing and monitoring controls designed by the board of directors. - Answer-A
Internal control can provide only reasonable assurance that the organization's
objectives will be met efficiently and effectively. One factor limiting the likelihood of
achieving those objectives is that
A. The internal auditor's primary responsibility is the detection of fraud.
B. The board is active and independent.
C. The cost of internal control should not exceed its benefits.
D. Management monitors performance. - Answer-C
Which of the following is the control component that reflects the attitude and actions
of the board and management regarding the significance of control within the
organization?
A. Risk assessment.
B. Control activities.
C. Control environment.
D. Monitoring. - Answer-C
According to COSO, which of the following is the most effective method to transmit
a message of ethical behavior throughout an organization?
A. Demonstrating appropriate behavior by example.
B. Strengthening internal audit's ability to deter and report improper behavior.
, C. Removing pressures to meet unrealistic targets, particularly for shortterm
results.
D. Specifying the competence levels for every job in an organization and translating
those levels to requisite knowledge and skills. - Answer-A
Within the COSO Internal Control - Integrated Framework, which of the following
components is designed to ensure that internal controls continue to operate effectively?
A. Control environment.
B. Risk assessment.
C. Information and communication.
D. Monitoring. - Answer-D
The COSO framework treats internal control as a process designed to provide
reasonable assurance regarding the achievement of objectives related to
A. Reliability of financial reporting.
B. Effectiveness and efficiency of operations.
C. Compliance with applicable laws and regulations.
D. All of the answers are correct. - Answer-D
Which of the following statements is correct regarding corporate compensation
systems and related bonuses?
1. A bonus system should be considered part of the control environment of an
organization and should be considered in formulating a report on internal control.
2. Compensation systems are not part of an organization's control system and
should not be reported as such.
3. An audit of an organization's compensation system should be performed
independently of an audit of the control system over other functions that impact
corporate bonuses.
A. 1 only.
B. 2 only.
C. 3 only.
D. 2 and 3 only. - Answer-A
According to COSO, which of the following is a compliance objective?
A. To maintain adequate staffing to keep overtime expense within budget.
B. To maintain a safe level of carbon dioxide emissions during production.
C. To maintain material price variances within published guidelines.
D. To maintain accounting principles that conform to GAAP. - Answer-B
Company management completes event identification and analyzes the risks. The
company wishes to assess its risk after management's response to the risk. According
to COSO, which of the following types of risk does this situation represent?
A. Inherent risk.
B. Residual risk.
Each of the following is a method to evaluate internal controls based on the
framework set by the Committee of Sponsoring Organizations (COSO), except
A. Distinguishing economy risk from industry risk and enterprise risk.
B. Evaluating internal control systems that focus first on risk identification of specific
losses.
C. Identifying mitigating controls to prevent losses.
D. Testing to determine whether the controls are operating effectively and have
prevented losses in the past. - Answer-A
An organization's directors, management, external auditors, and internal auditors all
play important roles in creating a proper control environment. Senior management is
primarily responsible for
A. Establishing a proper organizational culture and specifying a system of internal
control.
B. Designing and operating a control system that provides reasonable assurance that
established objectives and goals will be achieved.
C. Ensuring that external and internal auditors adequately monitor the control
environment.
D. Implementing and monitoring controls designed by the board of directors. - Answer-A
Internal control can provide only reasonable assurance that the organization's
objectives will be met efficiently and effectively. One factor limiting the likelihood of
achieving those objectives is that
A. The internal auditor's primary responsibility is the detection of fraud.
B. The board is active and independent.
C. The cost of internal control should not exceed its benefits.
D. Management monitors performance. - Answer-C
Which of the following is the control component that reflects the attitude and actions
of the board and management regarding the significance of control within the
organization?
A. Risk assessment.
B. Control activities.
C. Control environment.
D. Monitoring. - Answer-C
According to COSO, which of the following is the most effective method to transmit
a message of ethical behavior throughout an organization?
A. Demonstrating appropriate behavior by example.
B. Strengthening internal audit's ability to deter and report improper behavior.
, C. Removing pressures to meet unrealistic targets, particularly for shortterm
results.
D. Specifying the competence levels for every job in an organization and translating
those levels to requisite knowledge and skills. - Answer-A
Within the COSO Internal Control - Integrated Framework, which of the following
components is designed to ensure that internal controls continue to operate effectively?
A. Control environment.
B. Risk assessment.
C. Information and communication.
D. Monitoring. - Answer-D
The COSO framework treats internal control as a process designed to provide
reasonable assurance regarding the achievement of objectives related to
A. Reliability of financial reporting.
B. Effectiveness and efficiency of operations.
C. Compliance with applicable laws and regulations.
D. All of the answers are correct. - Answer-D
Which of the following statements is correct regarding corporate compensation
systems and related bonuses?
1. A bonus system should be considered part of the control environment of an
organization and should be considered in formulating a report on internal control.
2. Compensation systems are not part of an organization's control system and
should not be reported as such.
3. An audit of an organization's compensation system should be performed
independently of an audit of the control system over other functions that impact
corporate bonuses.
A. 1 only.
B. 2 only.
C. 3 only.
D. 2 and 3 only. - Answer-A
According to COSO, which of the following is a compliance objective?
A. To maintain adequate staffing to keep overtime expense within budget.
B. To maintain a safe level of carbon dioxide emissions during production.
C. To maintain material price variances within published guidelines.
D. To maintain accounting principles that conform to GAAP. - Answer-B
Company management completes event identification and analyzes the risks. The
company wishes to assess its risk after management's response to the risk. According
to COSO, which of the following types of risk does this situation represent?
A. Inherent risk.
B. Residual risk.
