What are the three main types of internal controls?

The three main types of internal controls are detective, preventative, and corrective.

True or False: The control environment does not influence the effectiveness of internal controls.

False. The control environment establishes management's expectations and is foundational to the effectiveness of internal controls.

What role do monitoring activities play in internal controls?

Monitoring activities enhance internal controls.

• Ensure consistent implementation of controls.

• Identify weaknesses in the system.

• Promote accountability among staff.

Fill in the blank: Inherent risk refers to the risk that exists when an organization lacks any ___ to mitigate dangers.

Controls

True or False: Residual risk is the risk that is completely eliminated after implementing internal controls.

False. Residual risk is the risk that persists even after implementing internal controls.

What are operational risks, and how do they impact organizations?

Operational risks affect operations significantly.

• Involve unexpected daily issues.

• Stem from people and processes.

• Impact overall organizational effectiveness.

Fill in the blank: Compliance risk pertains to the potential of not meeting legal ___ or regulations.

Requirements

List the five key components of the COSO internal control framework.

Control Environment, Control Activities, Information and Communication, Monitoring Activities, Risk Assessment.

What is the purpose of internal audits in relation to internal controls?

Internal audits validate the consistent and effective application of a company's internal controls and corporate governance.

True or False: Control risk is the probability that internal controls function as intended.

False. Control risk is the probability that internal controls do not function as intended.

What steps should management take if risk assessments reveal inadequacies in controls?

Management should create and implement appropriate controls to address the identified risks promptly.

How can employee feedback contribute to the effectiveness of internal controls?

Employee feedback helps identify if internal controls are overly complex or inefficient, improving adherence and effectiveness.