AE 231 Governance Business Ethics Risk Management and Internal Control

7/23/2022 AE 231 - Governance, Business Ethics, Risk Management and Internal Control
AE 231 - Governance, Business Ethics,

Risk Management and Internal Control
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MULTIPLE CHOICE
Instructions: Choose the answer that corresponds to the best answer for each of the
following questions.
S1: The existence of a strong control environment provides absolute * 1 point

assurance that fraud will not occur in a company. S2: Examples of
segregation of duties include reporting, reviewing and approving
reconciliations, and approval and control of documents.
Both statements are true
Both statements are false
Only statement 1 is true
https://docs.google.com/forms/d/e/1FAIpQLSdsMH2MIlwRdib3HaOUDA8emcmaDCfFuRymX3x-pOjlSfsuNw/formResponse 1/23
What is the most widely recognized way to deter fraud? * 1 point
Quickly punish employees found committing fraud.
Encourage employees to report suspicious activity.
Keep management involved in company procedures.
Implement a good systems of controls.
In charge of reconciling the purchase order, delivery receipt, receiving * 1 point

report and supplier's invoice before initiating the voucher package for
payment.
Treasurer
Bookkeeper
Accounts Payable Clerk
Accounts Receivable Clerk
All of them
This encompasses all of the major risks faced by a business firm * 1 point
Financial risk
Enterprise risk
Speculative Risk
Pure risk
Which of the following is not a component of internal control? * 1 point
commitment to competence
risk assessment process
monitoring
control activities
none of them
The following are examples of risk retention, except * 1 point
self-insurance
shoplifting losses
loss sensitive plans
night security guards
The following threats might be created by family and personal * 1 point

relationships between an assurance team member and a director or officer
or, depending on their role, certain employees of the assurance client. What
is the exception?
Self-interest threat
Intimidation threat
Advocacy threat
Familiarity threat
Errors in the acquisitions and payments cycle include * 1 point
Creating a ctitious invoice and processing the invoice for payment
Executives charging to company's accounts services for personal use
Refund payable to a company's purchasing agent
Recording consigned items as purchases
None of them
An auditor vouched data for a sample of employees in a payroll register to * 1 point

approved clock card data to provide assurance that
Employees work the number of hours for which they are paid
Segregation of duties exist between the preparation and distribution of payroll
Payments to employees are computed at authorized rates
Internal controls relating to unclaimed payroll checks are operating effectively
What is the correct order of the steps in the Risk Management Process? * 1 point
Establish goals, Identify Potential loss exposure, Measure Potential loss exposure,
Choose Risk Handling Techniques, Implement techniques and Monitor
effectiveness.
Establish goals, Measure Potential loss exposure, Identify Potential loss exposure,
Choose Risk Handling Techniques, Implement techniques and Monitor
effectiveness.
Establish goals, Choose Risk Handling Techniques, Identify Potential loss exposure,
Measure Potential loss exposure, Implement techniques and Monitor effectiveness.
Establish goals, Choose Risk Handling Techniques, Measure Potential loss

exposure, Identify Potential loss exposure, Implement techniques and Monitor
effectiveness.
A smart fraudster usually manipulates which financial record in order to * 1 point

avoid audit trail?
statement of changes in equity
income statement
cash ow statement
statement of nancial position
All the following are objectives of risk management except * 1 point
minimize reputation risk
to insure all exposures to loss
develop and maintain plant safety program
minimize supply chain interruption
* 1 point
I, II, III and IV
II, III, and IV
I, II and III
I, III and IV
* 1 point
I, II and III
I and II
I and III
II and III
Which of the following is usually the most expensive of all control * 1 point
procedures?
internal audit
segregation of duties
bank reconciliation
issuance of o cial receipts
Statement 1: Selling a product at a price that proves to be unprofitable can * 1 point

be regarded as a failure to protect the assets of the company and therefore
considered as evidence of inadequate accounting control. Statement 2:
Financial statement fraud is typically committed by top level management.
Only Statement 1 is correct
Both statements are correct
Both statements are incorrect

An employee may pocket P5000 received from customer A on account and * 1 point
make no entry for the collection. The credit to A's account cannot however
be left unrecorded for a long period of time. Therefore, when another
customer B remits P6000, the cashier credits A's account with P5000 and
pockets the difference. This irregularity is known as
Kiting
Skimming
Window dressing
Lapping
None of them
Who has the ultimate responsibility for maintaining an appropriate balance * 1 point
between management and the owners?
Managers
Board of directors
Regulating entities
Shareholders
S1: All changes in share capital accounts should receive formal advance * 1 point
approval by anyone.S2: Any company large enough to issue bonds and
unable to find a ready market for the securities will almost always utilize
the services of a large bank as an independent trustee.
Personal rationalizations often revolve around mistreatment by the * 1 point

company or a sense of entitlement by the individual perpetrating the fraud.
Following are some common rationalizations for asset misappropriations
except
This is "borrowing" only
I need to save a family member from nancial crisis.
Others are treated better
There is a complex organizational structure
None of them
* 1 point
The following methods could result to a window dressed financial reports, * 1 point
except
recording consignment as sales
recording valid transactions twice
recording revenue that should be unearned
recording a payment twice
none of them
In order that sound internal accounting control could be achieved, which * 1 point
department should perform the activities of matching shipping documents
with sales orders and preparing daily sales summaries?
Sales order
Credit
Shipping
Billing
Which of the following is not an element of the component "control activity" * 1 point
performed by personnel at various levels in organizations?
budget variance analysis
periodic inventory count
computer access security
preparing company's code of ethics
none of them
* 2 points
All statements are true
S1 and S2 are false
S2 and S3 are false
All statements are false
Outsourcing could be an example of _________if the outsourcer can * 1 point

demonstrate higher capability of managing or reducing risks.
risk avoidance
risk reduction
risk sharing
risk retention
S1: As long as a man is able to do all the work for himself, he is not * 1 point
concerned with internal control. S2: COSO has developed detailed
interpretative guidance that will help organizations monitor the quality of
their internal control systems.

S1: Internal control could not provide absolute assurance because of the * 1 point
possibility of circumvention of controls through collusion. S2: Internal
control could not detect and prevent all the cases in which problems may
exist.
For proper internal control, the same employee should not be permitted to: * 1 point
Approve credit sales and prepare sales invoice
Initiate request to order merchandise and approve merchandise received
Receive collections and deposit them intact
Prepare voucher package and update the subsidiary ledger
Which of the following is not an ideal internal control for cash * 1 point
disbursements?
All disbursements should be made by checks.
Unused checks should be kept under proper control.
Vouchers and supporting documents should be cancelled at the time of payment.
Blank checks should not be signed in advance.
none of them
S1: Internal control is designed and implemented to address all business * 1 point
risks that threaten the achievement of the objectives of internal control. S2:
The effectiveness of controls can rise above the integrity and ethical values
of the people who create, administer and monitor them
* 1 point
The duty to avoid con icts of interest
The duty to maintain objectivity
The duty to respect client personnel
The duty to not subordinate one’s opinion in favor of the client’s viewpoint
It refers to voucher payable for a voucher system. * 1 point
Share capital
Accounts payable
Internal control
Independent trustee
* 1 point
I, II and III
I and II
I and III
II and III
The Objectivity and Independence Principle of the Code of Ethics for * 1 point
Professional Accountants requires accountants to be independent in
providing what kind of services?
All audit services
All tax advisory services
All professional services
All services to their employer
Which of the following are risk treatment options? I. Changing the * 1 point
consequences II. Retaining the risk resource III. Taking or increasing the
risk IV. Changing the likelihood V. Sharing the risk VI. Retaining the
risk
All are risk treatment options
Only II, II, III, IV and V
Only II, III, IV, V and VI
Only II, II, IV, V and VI
Additions to equipment are sometimes understated. Which of the * 1 point

following accounts would be reviewed by the auditor to gain reasonable
assurance that additions are not understated?
Depreciation expense
Accounts payable
Repair and maintenance expense
Gain on disposal of equipment
Which of the following is not a compatible function of a treasury * 1 point

personnel?
mail o cial receipts to customers
distribute payroll checks
deposit collections intact and promptly
prepare daily collection report
none of them
What is the relationship between an entity's objectives and the controls is * 1 point
implements to provide reasonable assurance about their achievement?
direct
adverse
inverse
can not be determined
Generally, internal controls are implemented to help prevent which element * 1 point
of the fraud triangle?
nancial pressure
monetary gains
perceived opportunity
rationalization
As an internal auditor you are asked to review the organization's code of * 1 point
ethics and environment for ethical decision making. Which procedure is
NOT appropriate for the engagement?
Administration of anonymous "ethics test" to determine if employees know of

unethical behavior of have acted unethically themselves.
A survey of the BOD to determine their level of support for the organization's Code
of Ethics.
A survey of employees, asking general questions regarding the ethical quality of the
organization's decision making.
A review of code of ethics and comparison with other such codes.
Who is considered an independent auditor? One who * 1 point
Did not attend a school supported by the company.
Does not have any other relationships with the company other than his or her
directorship
Does not have outside relationships with other directors
Is not paid any kind of remuneration by the company
The following are manifestations of what tone of the top promotes. What is * 1 point
the exception?
Ethical conduct
Professional accountability
Unlawful behavior
Personal integrity
Omitting the quantity in the purchase order copy of the receiving section * 1 point
Is not an acceptable control because the receiver will not be guided on the quantity
of items delivered by the supplier
Is a good internal control to ensure the proper counting and inspection of the items
received.
Is not an acceptable control because it provides lack of audit trail
will make the purchasing cycle more complicated
all of them
To act ethically, a person must * 1 point
Adhere to the spirit, intent, and formal expression of a law
Follow the formal expression of a law
Follow both the spirit and the formal expression of a law
Do the right thing, even if violates a law
Statement 1: A system of authorizations and approvals is a good example * 1 point

of internal financial controls. Statement 2: In an audit, because of the test
nature and inherent limitations of internal control, some material
misstatement may remain undiscovered.
Both statements are correct
Both statements are incorrect
Which of the following is incorrect? * 1 point
Fraud may involve sophisticated schemes designed to conceal it.
The primary responsibility for the prevention and detection of fraud is with those
charged with governance and the auditors of the entity.
Fraudulent nancial reporting involves intentional misapplication of accounting

policies.
The more pressure or incentive there is, the more probable it is that someone will be
able to justify why committing fraud is acceptable.
* 1 point
I, II, III and IV
I, II and IV
II, III and IV
I and II
A sales invoice cut-off test complements the verification of * 1 point
Sales returns
Accounts Receivable
Sales discounts and allowances
Cash
The following situations pertain to a similar fraud risk factor, except * 1 point
The business has no cameras or security devices.
No one matches the cash in the register to receipts when shifts end.
A worker feels that fellow employees are not honest.
Lack of mandatory vacations for employees.
An effective process to identify actual or potential conflicts of interest will * 1 point

take into account factors except
The nature of the professional services provided
Matters to be communicated
The size of the rm.
The size and nature of the client base
ISO 31000 suggests the following techniques to manage the risks, except * 1 point
risk acceptance
risk transfer
risk avoidance
risk reduction
none of them
A client erroneously recorded a large purchase twice. Which of the * 1 point

following internal control measures could not detect this error?
Footing the purchases journal
Tracing individual items from the purchases invoice to the ledger accounts
Reconciling vendors' monthly statements with subsidiary payable ledger accounts
Sending written quarterly con rmations to all vendors
Factors reflected in the control environment include * 1 point
estimating the signi cance of risk
identifying and recording all valid transactions
conducting separate evaluations
timeliness of Board of Directors meetings
The basic components of business operations and the primary subject * 1 point
matter of internal accounting control are
employees
assets
control activities
transactions
all of them
The following are mandatory audit committee reports except: * 1 point
Reports or minutes of its meetings to the company’s board of directors.
Formal quarterly report to the company’s shareholders and board of directors.
Formal annual report to the company’s shareholders and board of directors.
All of the above are mandatory audit committee reports
What is the primary difference between fraud and errors in financial * 1 point
statement reporting?
materiality of the misstatement
level of management involved
type of transaction affected
intent to deceive
all of them
In order to evaluate the effectiveness of the risk management framework, * 1 point

the organization should I. Measure risk management framework
performance against its purpose on a daily basis. II. Determine whether it
remains suitable to support achieving the objectives of the organization.
I only
II only
Both I and II
Neither I and II
" Have the courage to follow your heart and intuition. They somehow know what
you truly want to become." - Steve Jobs -
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7/23/2022 AE 231 - Governance, Business Ethics, Risk Management and Internal Control

AE 231 - Governance, Business Ethics,

Your email will be recorded when you submit this form

S1: The existence of a strong control environment provides absolute * 1 point

Both statements are true

Both statements are false

Only statement 1 is true

Only statement 2 is true

What is the most widely recognized way to deter fraud? * 1 point

Quickly punish employees found committing fraud.

Encourage employees to report suspicious activity.

Keep management involved in company procedures.

Implement a good systems of controls.

In charge of reconciling the purchase order, delivery receipt, receiving * 1 point

Accounts Payable Clerk

Accounts Receivable Clerk

Which of the following is not a component of internal control? * 1 point

risk assessment process

The following are examples of risk retention, except * 1 point

loss sensitive plans

night security guards

The following threats might be created by family and personal * 1 point

Errors in the acquisitions and payments cycle include * 1 point

Creating a ctitious invoice and processing the invoice for payment

Executives charging to company's accounts services for personal use

Refund payable to a company's purchasing agent

Recording consigned items as purchases

An auditor vouched data for a sample of employees in a payroll register to * 1 point

Segregation of duties exist between the preparation and distribution of payroll

Payments to employees are computed at authorized rates

Internal controls relating to unclaimed payroll checks are operating effectively

Establish goals, Choose Risk Handling Techniques, Measure Potential loss

A smart fraudster usually manipulates which ﬁnancial record in order to * 1 point

statement of changes in equity

statement of nancial position

All the following are objectives of risk management except * 1 point

minimize reputation risk

to insure all exposures to loss

develop and maintain plant safety program

minimize supply chain interruption

I, II, III and IV

II, III, and IV

issuance of o cial receipts

Statement 1: Selling a product at a price that proves to be unproﬁtable can * 1 point

Only Statement 1 is correct

Only Statement 2 is correct

Both statements are correct

Both statements are incorrect

Both statements are true

Both statements are false

Only statement 1 is true

Only statement 2 is true

Personal rationalizations often revolve around mistreatment by the * 1 point

This is "borrowing" only

I need to save a family member from nancial crisis.

Others are treated better

There is a complex organizational structure

Both statements are true

Both statements are false

Only statement 1 is true

Only statement 2 is true

recording consignment as sales

recording valid transactions twice