Question

Understanding internal control, components, procedures, and laws

Match the following terms with their definitions.

1. Internal control

2. Control procedures

3. Firewalls

4. Encryption

5. Environment

6. Information system

7. Separation of duties

8. Collusion

9. Documents

10. Audits

11. Operational efficiency

12. Risk assessment

13. Sarbanes-Oxley Act

a. Two or more people working together to overcome internal controls.

b. Part of internal control that ensures resources are not wasted.

c. Requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

d. Should be prenumbered to prevent theft and inefficiency.

e. Limits access to a local network.

f. Example: The person who opens the bank statement should not also be the person who is reconciling cash.

g. Identification of uncertainties that may arise due to a company’s products, services, or operations.

h. Examination of a company’s financial statements and accounting system by a trained accounting professional.

i. Without a sufficient one of these, information cannot properly be gathered and summarized.

j. The organizational plan and all the related measures that safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting data.

k. Component of internal control that helps ensure business goals are achieved.

l. Rearranges data by a mathematical process.

m. To establish an effective one, a company’s CEO and top managers must behave honorably to set a good example for employees.

Short answer

Firewalls mean limiting access to a local network.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of internal control

Internal control is a control that helps the company to increase its efficiency.

Correct option

1. Internal Control:

j.The organizational plan and all the related measures that safeguard assets encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting data.

2. Control procedures:

k.Component of internal control that helps ensure business goals are achieved.

3. Firewalls:

e.Limits access to a local network.

4. Encryption:

l.Rearranges data by a mathematical process.

5. Environment:

m.To establish an effective one, a company’s CEO and top managers must behave honorably to set a good example for employees.

6. Information system:

i. Without a sufficient one, information cannot properly be gathered and summarized.

7.Separation of duties

f.Example: The person who opens the bank statement should not also be the person reconciling cash.

8. Collusion:

a. Two or more people work together to overcome internal controls.

9.Documents:

d.Should be prenumbered to prevent theft and inefficiency.

10. Audits:

h.Examination of a company’s financial statements and accounting system by a trained accounting professional.

11. Operational efficiency:

b. Part of internal control that ensures resources are not wasted.

12.Risk assessment:

g. Identification of uncertainties that may arise due to a company’s products, services, or operations.

13. Sarbanes-Oxley Act:

c.Requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.