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Questions and Answers
Which component of internal control establishes the organization's culture and ethical values?
Which component of internal control establishes the organization's culture and ethical values?
- Monitoring activities
- Information systems
- Control environment (correct)
- Risk assessment
What is primarily evaluated during the risk assessment component of internal control?
What is primarily evaluated during the risk assessment component of internal control?
- The effectiveness of communication methods
- The organization's financial reporting
- Potential risks that could affect objectives (correct)
- The efficiency of the information system
Which of the following components is essential for ensuring that financial reporting is accurate?
Which of the following components is essential for ensuring that financial reporting is accurate?
- Information systems relevant to financial reporting (correct)
- Risk assessment
- Monitoring activities
- Control environment
Which component of internal control involves assessing the performance of other control activities over time?
Which component of internal control involves assessing the performance of other control activities over time?
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Effective communication related to internal controls should occur between which parties?
Effective communication related to internal controls should occur between which parties?
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Study Notes
Control Environment
- Establishes the organization's culture and ethical values
- Sets the tone of the organization and influences the control consciousness of its people
Risk Assessment
- Primarily evaluates the likelihood and impact of risks to an organization's achievement of its objectives
Control Activities
- Essential for ensuring that financial reporting is accurate
- Include policies and procedures to help ensure management directives are carried out
Monitoring Activities
- Involves assessing the performance of other control activities over time
- Ensures that internal controls are operating effectively and are adapted to changes in conditions
Communication
- Should occur between management, those charged with governance, and internal and external auditors
- Helps to ensure everyone is aware of their roles and responsibilities in maintaining effective internal controls
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