Which of the following did SOX NOT do to protect whistleblowers? A. Require public company audit committees to install procedures to receive
... [Show More] whistleblowers’ complaints. B. Provide a civil damages action for public company whistleblowers who suffer retaliation for providing information regarding a violation of federal securities laws. C. Provide whistleblowers with the right to sue immediately in federal court. D. Make it a crime punishable by a fine and/or imprisonment to retaliate against an informant who provides truthful information relating to the commission of any federal offense.Which of the following is necessary to be an audit committee financial expert, according to the criteria specified in the Sarbanes-Oxley Act of 2002? A. A limited understanding of generally accepted auditing standards. B. Education and experience as a certified financial planner. C. Experience with internal accounting controls. D. Experience in the preparation of tax returns.Under SOX, it is a crime to punish a public company whistleblower who provides truthful information relating to which of the following: A. Federal securities law violations. B. Federal tax law violations.Dan provided original information to authorities regarding a securities fraud in his company. It led the SEC to impose penalties of $2 million. Which of the following is most likely to be Dan’s award under Dodd-Frank? A. $50,000. B. $150,00 0. C. $350,00 0. D. $750,00 0Mar has been complicit in her public company’s accounting fraud. She consults a lawyer as the time comes to file her firm’s 10-K with the SEC. She is a little uncomfortable with what she might have to do. The lawyer will likely tell her that she will have to certify (and be potentially criminally liable for lying about) these matters: A. That she has reviewed the 10-K. B. That to her knowledge the 10-K does not contain any materially untrue statements. C. That she, along with the CEO, is responsible for establishing and maintaining her company’s internal controls. D. All of the above.Public company audit committees must contain which of the following? A. A majority of independent directors B. An accounting expertA public company audit committee’s “financial expert” must have all of the following except: A. An understanding of GAAP and financial statements. B. Experience in preparing or auditing financial statements of comparable companies and application of such principles in connection with accounting for estimates, accruals, and reserves. C. Experience with internal auditing controls. D. Experience on a public company’s compensation committee.Which of the following did Dodd-Frank do regarding a whistleblower’s right to sue for retaliation accorded by SOX? A. It extended the time to file a complaint with OSHA from 90 days to 180 days. B. It extended the right to sue to whistleblowing employees of private subsidiaries controlled by public companies. C. It granted whistleblowers the right to a jury trial in retaliation cases that are properly filed in federal court.. D. All of the aboveFang provided original information to authorities regarding a securities fraud in his company. The information led to an imposition of penalties of $500,000. It also led to Fang being fired in retaliation by his public company employer. Which of the following is true? A. Fang must receive a bounty for his whistleblowing. B. Fang may sue to seek compensation for the retaliation he suffered. C. A and B. D. None of the above.Which of the following statements presents an example of a general control for a computerized system? A. Limiting entry of sales transactions to only valid credit customers. B. Creating hash totals from Social Security numbers for the weekly payroll. C. Restricting entry of accounts payable transactions to only authorized users. D. Restricting access to the computer center by use of biometric devices.Which of the following is an example of a detective control? A. Use of pre-formatted screens for data entry. B. Comparison of data entry totals to batch control totals. C. Restricting access to the computer operations center to data-processing staff only. D. Employing a file librarian to maintain custody of the program and data filesReview of the audit log is an example of which of the following types of security control? A. Governance. B. Detective. C. Preventive. D. Corrective.Milo Corp. maintains daily backups of its accounting system in a fireproof vault in the file library. Weekly, monthly, and annual backups are stored in a secure, fireproof vault at an off-site location. Maintenance of the backup files is an example of A. a detective control. B. a feedback control. C. a corrective control. D. a preventive control.Controls in the information technology area are classified into the categories of preventive, detective, and corrective. Which of the following is a preventive control? A. Contingency planning. B. Hash total. C. Echo check. D. Access control software.A company’s new time clock process requires hourly employees to select an identification number and then choose the clock-in or clock-out button. A video camera captures an image of the employee using the system. Which of the following exposures can the new system be expected to change the least? A. Fraudulent reporting of employees’ own hours. B. Errors in employees’ overtime computation. C. Inaccurate accounting of employees’ hours. D. Recording of other employees’ hours.Which component of the COSO ERM framework is concerned with management’s decision to avoid, accept, reduce, or share risk and to develop a set of actions to align risk with the entity’s risk preferences? A. Control activities. B. Event identification. C. Risk assessment. D. Risk response.This component of internal control concerns the policies and procedures that ensure that actions are taken to address the risks related to the achievement of management’s objectives. A. Control activities. B. Control environment. C. Monitoring. D. Risk assessment. Answer: A Control activities are, “...the policies and procedures that ensure that actions are taken to address the risks related to the achievement of management’s objectives.” 18. Strategic, operations, reporting, and compliance objectives are a part of which of the following models of internal control? A. COBIT. B. COSO. C. COSO ERM. D. All of the above. Answer: C This answer is correct because strategic, operations, reporting, and compliance objectives are part of this model. 19. Which of the following items is one of the eight components of COSO’s enterprise risk management framework? A. Operations. B. Reporting. C. Monitoring. D. Compliance. Answer: C Monitoring is one of the eight components of COSO’s enterprise risk management framework. 20. This component of internal control concerns testing the system and its data. A. Control activities. B. Control environment. C. Monitoring. D. Risk assessment. Answer: C Monitoring ensures the ongoing reliability of information by monitoring and testing the system and its data. 21. In the COSO model, each of the following is a control objective except A. Compliance. B. Monitoring. C. Operations. D. Reporting. Answer: B Monitoring is correct because it is not a control objective in the COSO model. 22. According to COSO, which of the following is a compliance objective? A. To maintain adequate staffing to keep overtime expense within budget. B. To maintain a safe level of carbon dioxide emissions during production. C. To maintain material price variances within published guidelines. D. To maintain accounting principles that conform to GAAP. Answer: B Maintaining a safe level of carbon dioxide emissions during production is, in the U.S.A., required for compliance with law or regulation. 23. This is the process of identifying, analyzing, and managing the risks involved in achieving the organization’s objectives. A. Control activities B. Control environment C. Information and communication D. Risk assessment Answer: D Risk assessment is, “...the process of identifying, analyzing, and managing the risks involved in achieving the organization’s objectives.” 24. This fundamental component of internal control is the core or foundation of any system of internal control. A. Control activities. B. Control environment. C. Information and communication. D. Risk assessment. Answer: B The control environment is, “...the core or foundation of any system of internal control.” 25. The original COSO model has _____ control components, while the COSO ERM model has _____ control components. A. 2, 4 B. 4, 8 C. 8, 16 D. 5, 8 Answer: D This answer is correct because the COSO model has 5 control objectives and the COSO ERM model has 8 control objectives. 26. This component of internal control enables an organization’s people to identify, process, and exchange the information needed to manage and control operations. A. Control activities. B. Control environment. C. Information and communication. D. Risk assessment. Answer: C Information and communication enables an organization’s people to identify, process, and exchange the information needed to manage and control operations. 27. In the COSO (2011) “cube” model, each of the following are components of internal control except A. Monitoring. B. Control activities. C. Operations control. D. Risk assessment. Answer: C Operations control is not a component of internal control in the COSO model. Introduction to International Professional Practices Framework 28. One of the Rules of Conduct in the IIA’s Code of Ethics states, “Internal auditors shall perform internal audit services in accordance with the International Standards for the Professional Practice of Internal Auditing.” To which Principle of the Code of Ethics does this Rule of Conduct relate? A. Integrity. B. Objectivity. C. Confidentiality. D. Competency. Answer: D That particular Rule of Conduct is designated Rule #4.2, in connection with “Competency.” 29. The IIA’s International Professional Practices Framework includes among its “mandatory” guidance each of the following elements except A. Definition of Internal Auditing. B. Code of Ethics. C. Practice Guides. D. International Standards. Answer: C Mandatory guidance consists of: (1) Definition of Internal Auditing; (2) Code of Ethics; and (3) International Standards. The “strongly recommended” guidance consists of (1) position papers; (2) practice advisories; and (3) practice guides. 30. What term identifies the type of internal auditing standards used to describe the characteristics associated with organizations and individuals who provide internal audit services? A. Implementation Standards. B. Attribute Standards. C. Performance Standards. D. Interpretations of the International Standards. Answer: B Attribute Standards address the characteristics (“attributes”) of organizations and individuals performing internal audit services. 31. The IIA’s Code of Ethics identifies four “Principles” around which the 12 Rules of Conduct are organized. Each of the following key words or phrases is associated with these Principles except A. Objectivity. B. Confidentiality. C. Continuous Improvement. D. Competency. Answer: C The key words associated with the four Principles comprising the IIA’s Code of Ethics are (1) Integrity; (2) Objectivity; (3) Confidentiality; and (4) Competency. The phrase “continuous improvement” is not one of the underlying themes in the Code of Ethics. 32. The IIA’s Definition of Internal Auditing specifically mentions each of the following terms among the organizational objectives to be improved by internal auditing except A. cost of capital. B. risk management. C. control. D. Governance. Answer: A The Definition of Internal Auditing includes the following sentence: “It (Internal Auditing) helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” There is no reference to “cost of capital,” which is normally associated with financial reporting and external auditing. 33. What term identifies the type of internal auditing standards used to measure the quality of the internal auditor’s conduct in delivering internal audit services? A. Implementation Standards. B. Attribute Standards. C. Performance Standards. D. Interpretations of the International Standards. Answer: C Performance Standards describe internal auditing and identify the quality criteria applicable to the performance of internal audit services. Microeconomics 34. The free-market economy flow model depicts four major interrelated flows: I. Individuals provide economic resources to business firms. II. Firms provide payment to individuals for economic resources. III. Firms provide goods and services to individuals. IV. Individuals provide payment to firms for goods and services. If financial institutions and businesses suddenly and severely restrict the availability of consumer credit, which one of the above flows would be most likely to be the first to be impacted adversely? A. I. B. II. C. III. D. IV. Answer: D Initially, a sudden and severe restriction in the availability of consumer credit likely would adversely impact the ability of individuals to provide payment to firms for goods and services. The lack of credit likely would reduce consumer demand, which would then begin to impact other flows. 35. Which of the following is not a characteristic of a free-market economy? A. Economic decisions are made by individual decision makers. B. There is an interdependent relationship between individual consumers and business firms. C. Economic resources are unlimited. D. What gets produced depends on the preferences of end-use consumers. Answer: C Under any economic system, economic resources--labor, capital, and natural resources--are scarce. 36. In a free-market economy, which of the following should be the least significant factor in determining resource allocation and use? A. Preferences of individuals. B. Availability of economic resources. C. Government regulation of commerce. D. Level of technological development. Answer: C In a free-market economy, government regulation of commerce should be the least significant factor (of those listed) in determining resource allocation and use. 37. Which of the following are considered economic resources? Labor Capital Natural resources A. Yes Yes Yes B. Yes Yes No C. No No No D. No Yes Yes Answer: A Labor (human work, etc.), capital (financial and man-made), and natural resources (land, minerals, etc.) are all economic resources and they are scarce. 38. The free-market economy flow model depicts four major interrelated flows: I. Individuals provide economic resources to business firms. II. Firms provide payment to individuals for economic resources. III. Firms provide goods and services to individuals. IV. Individuals provide payment to firms for goods and services. If the cost of imported oil declined suddenly and significantly, which one of the above flows would be most likely to be the first impacted? A. I. B. II. C. III. D. IV. Answer: C Initially, a sudden and significant decline in the cost of imported oil likely would impact a firm’s ability to provide goods and, to a lesser extent, services to individuals. A decline in the cost of imported oil will decrease the cost of inputs to the production process, both for goods produced with oil and its by-products and for the cost of transportation of all goods and services. A decrease in the cost of inputs would be likely to result in more goods and services provided at lower prices. 39. When a demand schedule is plotted on a graph, the resulting demand curve will be A. positively sloped. B. negatively sloped. C. completely vertical. D. completely horizontal. Answer: B The demand schedule of an individual or of the market shows that more units of a commodity are demanded as the price decreases. Therefore, the demand curve would be negatively sloped; the quantity demanded would be lower at higher prices and would increase as price decreases. The quantity demanded varies inversely with price along a given demand curve: Thus, a demand curve has a negative slope; quantity is inversely related to price. 40. The demand curve for a product reflects which of the following? A. The impact of prices on the amount of product offered. B. The willingness of producers to offer a product at alternative prices. C. The impact that price has on the amount of a product purchased. D. The impact that price has on the purchase amount of two related products. Answer: C The demand curve reflects the impact that price has on the amount of a product purchased. A demand curve (or schedule) for a product shows the quantity of a commodity that will be demanded at various prices during a specified time, ceteris paribus (holding variables other than price constant). 41. Concurrent with a significant downturn in the economy, the sale of Scope’s high-end electronics decreased dramatically. Which of the following is the most likely direct cause of the decline in demand for Scope’s products? A. Scope increased the price of the products. B. Income of market participants decreased. C. Scope reduced the price of its products. D. Market participants’ preferences for electronics changes. Answer: B In view of the economic downturn, a decrease in the income of market participants for high-end electronics was probably the direct cause of the decline in demand for Scope’s products. A decrease in income is normally associated with a decrease in demand for normal (and “above normal”) goods and an increase in demand for inferior goods. [Show Less]