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Internal Control and Risk Management

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Questions and Answers

What is the primary function of control activities in internal control?

Identifying and assessing risks to the achievement of objectives

Implementing specific actions to mitigate risks to objectives (correct)

Providing necessary information for internal control responsibilities

Establishing standards and procedures for internal control

What is the primary purpose of monitoring activities in internal control?

To identify and assess risks to the achievement of objectives

To establish standards and procedures for internal control

To ensure that internal control is effective over time (correct)

To provide necessary information for internal control responsibilities

What is a limitation of internal control due to human factors?

Employee errors or biases (correct)

Cost-benefit considerations

Collusion between employees

Management override of internal control

What is the relationship between the five components of internal control in the COSO framework?

They operate in an integrated manner Signup and view all the answers

What is the primary purpose of the control environment in internal control?

To provide the basis for carrying out internal control Signup and view all the answers

What is the primary purpose of information and communication in internal control?

To provide necessary information for internal control responsibilities Signup and view all the answers

What is the primary focus of risk management in an organization?

External risks such as market prices and natural calamities Signup and view all the answers

What is an indication of effective and efficient operations?

Achievement of revenue and operating cash flow targets Signup and view all the answers

What is the purpose of Internal Controls over Financial Reporting (ICFR)?

To provide reliable financial statements Signup and view all the answers

What is an example of a nonfinancial report that should be reliable?

Environmental and sustainability report Signup and view all the answers

What is a crucial aspect of internal control?

Ensuring compliance with applicable laws and regulations Signup and view all the answers

What are the three main objectives of internal control?

Effective and efficient operations, reliability of financial and nonfinancial reporting, and compliance with applicable laws and regulations Signup and view all the answers