Internal Control: Test Your Knowledge

By James Schaefer, CPA, DBA and Joy V. Peluchette, DBA

MARCH 2010

Today many companies recognize the desirability as well as the requirement to have an effective system of internal control. Yet, designing and implementing a cost-effective system of internal control is a daunting, if not overwhelming, task.

One way to overcome resistance to internal control is to educate stakeholders at every level of the organization about its advantages.

Try the following quiz to test your knowledge of internal control and consider using it as a teaching tool for others in your organization.

1. Houston Helpers, a faith-based group that offers help to people in need, has hired Janet Wells, a local CPA, to train its professional staff in the basics of internal control. As Wells begins her presentation, a participant interrupts by saying, “We are not like other organizations. How can we talk about common elements of internal control when we are a faith-based service provider?”

a. The participant is correct; there are no generally accepted frameworks for internal control.

b. The participant is incorrect; there are generally accepted frameworks for internal control, regardless of industry.

2. Internal control is a process designed to provide reasonable assurance regarding the achievement of which objective?

a. Effectiveness and efficiency of operations

b. Reliability of financial reporting

c. Compliance with applicable laws and regulations

d. All of the above

3. CS Inc. has asked you to join its board of directors. Before agreeing to do so, you realize that it is important that you understand the company’s approach to Enterprise Risk Management (ERM). Which of the following is NOT true about ERM?

a. ERM is a bottom-up view of the key risks facing the organization.

b. ERM links growth, risk and return.

c. ERM aligns risk appetite and strategy.

d. ERM identifies and manages cross-enterprise risk.


For more questions and the correct answers, please click on the heading above.