What is the primary objective of internal controls?
A) Detect fraud after it occurs
B) Ensure the accuracy and reliability of financial reporting
C) Replace external audits
D) Increase business expenses
Which of the following is NOT a component of internal control as per COSO framework?
A) Control Environment
B) Risk Assessment
C) External Auditing
D) Monitoring Activities
Which type of internal control is designed to detect errors or fraud after they have occurred?
A) Preventive control
B) Detective control
C) Corrective control
D) Directive control
The Sarbanes-Oxley Act (SOX) is primarily focused on:
A) Strengthening internal controls in corporations
B) Regulating tax compliance
C) Reducing corporate income tax
D) Controlling employee wages
What is the main purpose of an auditor evaluating internal controls?
A) To prepare tax returns
B) To assess the risk of material misstatements in financial statements
C) To replace financial reporting
D) To eliminate fraud completely
Internal controls should be:
A) Static and unchangeable
B) Monitored and improved continuously
C) The sole responsibility of the auditor
D) Used only by large corporations
Segregation of duties is an example of:
A) External auditing
B) Detective control
C) Preventive control
D) Compliance testing
Which of the following is NOT a type of audit opinion?
A) Unqualified opinion
B) Qualified opinion
C) External opinion
D) Adverse opinion
According to auditing standards, which of the following is the auditor’s responsibility?
A) Guarantee the accuracy of financial statements
B) Express an independent opinion on financial statements
C) Approve all financial transactions
D) Make management decisions
Which internal control component identifies risks that could affect financial reporting?
A) Risk Assessment
B) Control Activities
C) Information & Communication
D) Monitoring Activities
Which organization issues International Standards on Auditing (ISAs)?
A) IFAC
B) SEC
C) IRS
D) COSO
Which of the following is an example of a preventive control?
A) Monthly bank reconciliation
B) Two-factor authentication for system access
C) Surprise cash counts
D) Reviewing past financial transactions
An independent audit function within an organization is known as:
A) External Audit
B) Internal Audit
C) Tax Audit
D) Compliance Audit
The main purpose of an audit report is to:
A) Provide an opinion on the fairness of financial statements
B) Detect all frauds in an organization
C) Approve management decisions
D) Ensure tax compliance
Which control activity ensures that employees follow internal policies and procedures?
A) Monitoring
B) Information systems control
C) Authorization and approval
D) External audit
The control activity that ensures business transactions are properly recorded is:
A) Reconciliation
B) Physical controls
C) Risk assessment
D) Segregation of duties
An auditor’s unqualified opinion indicates that:
A) Financial statements contain material misstatements
B) The company failed to follow accounting principles
C) Financial statements present a true and fair view
D) The audit was incomplete
Which of the following is an example of a detective control?
A) Firewalls and password protection
B) Physical security of assets
C) Internal audits and reconciliations
D) Training programs for employees
Who is responsible for establishing internal controls within an organization?
A) External auditors
B) Senior management and board of directors
C) Government regulators
D) Shareholders
Which internal control principle requires different employees to handle different parts of a transaction?
A) Documentation procedures
B) Independent internal verification
C) Segregation of duties
D) Physical controls
Which of the following statements is TRUE regarding internal controls?
A) Internal controls eliminate all risks
B) Internal controls must be reviewed and updated periodically
C) Internal controls are only needed for financial transactions
D) Internal controls replace external audits
Which of the following is an example of a physical control?
A) Security cameras in the office
B) Monthly financial statements
C) Independent internal audit
D) Authorization of transactions
A qualified audit opinion is issued when:
A) Financial statements are completely misstated
B) There is a material misstatement, but it is not pervasive
C) The auditor finds no issues
D) The auditor refuses to express an opinion
An adverse audit opinion means:
A) The financial statements are free from material misstatements
B) The company has weak internal controls
C) The financial statements are materially misstated
D) The auditor has insufficient evidence
The primary purpose of an external audit is to:
A) Detect and prevent fraud
B) Ensure compliance with labor laws
C) Provide assurance on financial statements
D) Manage business risks
Which internal control component includes training employees on company policies?
A) Monitoring
B) Risk assessment
C) Control environment
D) Information & communication
Which of the following ensures compliance with laws and regulations?
A) Control Environment
B) Risk Assessment
C) Compliance Audits
D) Strategic Planning
What is the primary role of the audit committee?
A) Conduct audits themselves
B) Oversee the financial reporting process and internal controls
C) Approve company budgets
D) Manage tax filings
