All page numbers refer to the COSO Enterprise Risk Management—Integrated Framework. You may print...

Question

All page numbers refer to the COSO Enterprise Risk Management—Integrated Framework. You may print the relevant pages or may save the book to a storage device. No citation or bibliography is necessary unless you utilize a resource other than the Integrated Framework.

Read Objective Setting pages 35-38.

Read Event Identification pages XXXXXXXXXXstop at Event Identification Techniques) and Exhibit 4.2 pages 46-47.

Read Risk Assessment pages XXXXXXXXXXstop at Data Sources.)

Read Risk Response pages XXXXXXXXXXstop at Portfolio View.)

Read Control Activities pages XXXXXXXXXXstop at Controls over Information Systems.)

Control activities relate primarily to which risk response?

Identify and explain examples of performance indicators, financial analysis tools, and operational metrics that could be used to detect irregularities and unexpected results.

Identify and explain three basic duties that must be “segregated” (completed by different people) in order to maintain adequate internal control.

The owner of Gardner Company, a small manufacturing client, has asked your advice on how to best segregate duties given that there are only 3 clerical employees. Assign the following eight functions between employees 1, 2 and 3.
1. Maintain the general ledger
2. Maintain the accounts payable subsidiary ledger
3. Maintain the accounts receivable subsidiary ledger
4. Prepare checks for signature
5. Maintain the cash disbursements journal
6. Issue credits on returns and allowances
7. Reconcile the bank account
8. Receive and deposit cash receipts

Employee 1

Employee 2

Employee 3

In a small company, complete segregation of duties may not be possible. Explain the best “compensating” control?

When designing a control for a specific identified risk, do you feel a company should focus on preventive or detective controls?

005_q0y6a5o-yecapqfo.pdf 005_q026a5o-gi3uh0f0.docx

David · Accepted Answer

Question 5: Read Control Activities pages 61-64 (stop at Controls over Information 
Systems.)  Control activities relate primarily to which risk response?  
Control activities are the policies as well as procedures that are aimed towards ensuring 
that management’s risk responses have been carried out. They primarily aim towards 
management risk responses. It includes a wide array of activities – as vast as the approvals, 
authorizations, reviews of operating performance, asset securitization, verifications, 
reconciliations, as well as the segregation of duties. 
Question 6: Identify and explain examples of performance indicators, financial analysis 
tools, and operational metrics that could be used to detect irregularities and unexpected 
results. 
An organization can use numerous tools for detecting irregularities and unexpected 
results. Firstly, an organization can resort to performance management tools. It includes defining 
the key success variables and key performance indicators for the organization and timely 
measuring them to get a view of overall performance of the organization. The major reason to 
demand for increased precision in accounting is to enhance the quality of performance 
measurement for various companies.  
Financial Ratios are best tool for measuring liquidity, solvency, profitability and 
management efficiency of the firm.

All page numbers refer to the COSO Enterprise Risk Management—Integrated Framework. You may print the relevant pages or may save the book to a storage device. No citation or bibliography is necessary...

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