Tag: Ethics

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

Select ONE answer:

1. Lack of controls over the purchasing system
2. Lack of staff to ensure segregation of duties
3. Lack of controls over the inventory system
4. Lack of understanding of the purposes 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 4

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

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

Most entities make use of IT systems for financial reporting and operational purposes.

Controls operating in an IT environment can be split into general controls and application controls.

Which ONE of the following is an application control?

Select ONE answer:

1. Training staff in new IT procedures
2. Taking backup copies of programs
3. Cyclical reviews of all master files
4. Maintenance agreements over IT equipment

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 => Cyclical reviews of the master files is an application control. The remainder of the options available are general controls.
4. Not correct

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

Which ONE of the following would NOT be a good source of information about a company’s systems?

Select ONE answer:

1. The company’s procedures manual
2. The company’s website
3. The internal audit function’s system notes
4. Inquiries made of company staff

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 => The company’s website is very unlikely to contain details on the internal control system.
3. Not correct
4. Not correct

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

Which ONE of the following would NOT be a good source of information about a company’s systems?

Select ONE answer:

1. The prior year audit file
2. The company’s procedures manual
3. The internal audit function’s system notes
4. Inquiries made of company staff

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 => While the prior year audit file will be useful, the system may have changed in the intervening period.
2. Not correct
3. Not correct
4. Not correct

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

Which ONE of the following would be the simplest way of recording a straightforward system not subject to a great deal of change annually?

Select ONE answer:

1. Flowchart
2. Questionnaire
3. Family tree
4. Narrative notes

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 => Narrative notes would be the simplest way of recording a straightforward system that is not subject to a great amount of change annually. It is, however, the least effective way in terms of readily identifying the system in operation and the deficiencies of the system.

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