Accounting Information Systems 2nd Edition By Vernon Richardson – Test Bank

Chapter 11
AIS and Internal Controls
Answer Key

True / False Answers

1. The Sarbanes-Oxley Act of 2002 (SOX) 2002 requires the management of all companies and their auditors to assess and report on the design and effectiveness of internal control over financial reporting annually.

Answer: False
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01 Explain essential control concepts and why a code of ethics and internal controls are important
Source: Original
Topic: The Need for a Code of Ethics
Topic: Overview of Control Concepts

2. According to the Sarbanes-Oxley Act of 2002, it is the responsibility of the Board of Directors to establish and maintain the effectiveness of internal control.

Answer: False
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01 Explain essential control concepts and why a code of ethics and internal controls are important
Source: Original
Topic: The Need for a Code of Ethics
Topic: Overview of Control Concepts

3. In a computerized environment, internal controls can be categorized as general controls and application controls.

Answer: True
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01 Explain essential control concepts and why a code of ethics and internal controls are important
Source: Original
Topic: Overview of Control Concepts

4. Internal controls guarantee the accuracy and reliability of accounting records.

5. Segregation of duties reduces the risk of errors and irregularities in accounting records.

Answer: True
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Explain the objectives and components of COSO Internal Control framework and those of COSO Enterprise Risk Management (ERM) framework
Source: Original
Topic: COSO Internal Control Framework

6. The chief executive officer is ultimately responsible for enterprise risk management.

7. The risk of a company’s internal auditing processes failing to catch the misstated dollar amount of revenue on the company’s income statement is classified as inherent risk.

Answer: False
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Risk Analysis
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Explain the objectives and components of COSO Internal Control framework and those of COSO Enterprise Risk Management (ERM) framework
Source: Original
Topic: COSO Internal Control Framework

8. Processing controls are IT general controls.

Answer: False
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Leveraging Technology
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Explain the objectives and components of COSO Internal Control framework and those of COSO Enterprise Risk Management (ERM) framework
Source: Original
Topic: COSO Internal Control Framework

9. COBIT (Control Objectives for Information and related Technology) is a generally accepted framework for IT governance in the U.S.

Answer: True
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Risk Analysis
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-03 Describe the overall COBIT framework and its implications on IT governance
Source: Original
Topic: COBIT Framework

10. The main objective of the ISO 27000 series is to provide a model for establishing, implementing, operating, monitoring, maintaining, and improving information security.

Answer: True
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Risk Analysis
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Describe other governance framework related to information systems management and security
Source: Original
Topic: ISO 27000 SeriesGiven the requirement of the Sarbanes-Oxley Act of 2002 (SOX), the Public Company Accounting Oversight Board (PCAOB) established the Securities and Exchange Commission (SEC) to provide independent oversight of public accounting firms.