Tag: Ethics

ISA (UK) 315 states that an internal control system in an organisation consists of five components:

• the control environment
• the entity’s risk assessment process
• the information system
• the control activities
• the monitoring of controls

For each of the following examples, select the component which it illustrates:

– Training programme for all staff

Select ONE answer:

1. the control environment
2. the control activities
3. the entity’s risk assessment process
4. the monitoring of controls

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct => A training programme for all staff is part of the control environment.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

With regards to internal control systems in small entities, select whether each of the following statements is true or false:

A – Smaller companies are more likely to be successful in the implementation of segregation of duties controls
B – Management override is more likely to take place in smaller companies.

Select ONE answer:

1. Statement A – True, and Statement B – True
2. Statement A – False, and Statement B – False
3. Statement A – True, and Statement B – False
4. Statement A – False, and Statement B – True

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct => Small companies are less likely to be successful in the implementation of segregation of duties controls due to the limited number of employees available to segregate specific tasks within the various cycles. Given the limited number of staff in small companies and the dominance of management, controls are more likely to be overridden in smaller companies than larger ones.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which ONE of the following is an authorisation control activity?

Select ONE answer:

1. A bank reconciliation was compiled by the finance director himself
2. An appraisal of the sales ledger clerk by the finance director
3. A cheque payment run approved by the finance director
4. A trial balance compiled by the finance director

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct => Appraising the sales ledger constitutes a performance review, and compiling the trial balance are information processing control activities.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which ONE of the following is an authorisation control activity?

Select ONE answer:

1. A cheque payment system compiled by the finance director himself
2. A bank reconciliation signed by the finance director
3. An appraisal of the sales ledger clerk by the finance director
4. A trial balance compiled by the finance director

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct => Appraising the sales ledger constitutes a performance review, and compiling the trial balance are information processing control activities.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which ONE of the following represents an inherent limitation of a system of internal controls?

Select ONE answer:

1. The possibility that staff members will collude in fraud 
2. Lack of controls over the purchasing system
3. Lack of staff to ensure segregation of duties
4. Lack of controls over the inventory system

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct => The last three options are incorrect as they are control deficiencies, rather than inherent limitations of an internal control system as such.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.