Internal Controls and Auditing Flashcards
7 cards from real GRC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Internal Controls and Auditing flashcards as text
What is the PRIMARY objective of an internal audit function according to the IIA Standards?
Answer: Add value and improve the organization's operations through assurance and consulting
The IIA defines internal audit's mission as enhancing and protecting organizational value through risk-based assurance, advice, and insight.
When an auditor evaluates whether controls would have prevented or detected a known fraud scheme, this is an example of:
Answer: Fraud risk assessment
Fraud risk assessment involves identifying fraud schemes and evaluating whether existing controls adequately prevent or detect them.
Which concept requires that no single individual should be able to initiate, authorize, record, AND reconcile a transaction?
Answer: Segregation of duties
Segregation of duties ensures that incompatible functions are divided across multiple people to reduce risk of error or fraud.
A 'control deficiency' exists when:
Answer: A control is missing or not operating effectively enough to prevent or detect misstatements
A control deficiency occurs when the design or operation of a control does not allow management to prevent or detect misstatements on a timely basis.
What is the purpose of an audit committee in relation to internal controls?
Answer: Provide independent oversight of financial reporting and internal audit function
The audit committee, composed of independent directors, oversees financial reporting integrity and serves as a liaison with internal and external auditors.
Which audit testing approach starts from the financial statement balance and traces back to supporting source documents?
Answer: Vouching (tracing backward)
Vouching tests for existence/occurrence by starting from recorded amounts and tracing back to source documents to verify they are real.
In the context of internal auditing, what does 'independence' mean?
Answer: The internal audit function is free from conditions that threaten objectivity
Independence means the internal audit function operates without interference or bias, typically reporting to the audit committee rather than operational management.