Keeping supplies in a locked room with access allowed only to authorized personnel is an example of which preventive control?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Employee management.

Answer: Physical controls.

Which of the following is an example of detective controls?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Reconciliations.

Answer: Reconciliations.

Which of the following is not an example of preventive controls?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Reconciliations.

Answer: Reconciliations.

What is the concept behind separation of duties in establishing internal controls?

A) The company's financial accountant should not share information with the company's tax accountant.

B) Duties of middle-level managers should be clearly separated from those of top executives.

C) Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

D) The external auditors of the company should have no contact with managers while the audit is taking place.

Answer: Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

Separation of duties refers to:

A) Making each manager personally responsible for his/her department.

B) Keeping functions across different departments separate.

C) Preventing top management and lower-level employees from interacting.

D) Individuals who have physical responsibility for assets should not also have access to accounting records.

Answer: Individuals who have physical responsibility for assets should not also have access to accounting records.

The components of internal control do not directly include:

A) Risk assessment.

B) Inflation adjustment.

C) Monitoring.

D) Control activities.

Answer: Inflation adjustment.

The component of internal control that includes the formal procedures for reporting control deficiencies is:

A) Monitoring.

B) Information and communication.

C) Risk assessment.

D) Control activities.

Answer: Monitoring.