Multiple Choice
Which of the following are the three primary characteristics of an effective control system in a business?
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6. Internal Controls and Reporting Cash
Five Components of Internal Controls
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Internal auditing is an example of which type of control within the five components of internal controls?
A
Monitoring activities
B
Control environment
C
Risk assessment
D
Information and communication
Verified step by step guidance1
Understand the five components of internal controls: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities.
Review the definition of Monitoring Activities: This component involves ongoing evaluations to ensure that internal controls are functioning effectively over time. It includes activities like internal auditing, which assesses the performance of controls and identifies areas for improvement.
Compare the role of internal auditing with the other components: Internal auditing does not establish the control environment, assess risks directly, or focus on communication processes. Instead, it evaluates and monitors the effectiveness of these components.
Recognize that internal auditing aligns with Monitoring Activities because it provides feedback on the performance of controls and ensures they are operating as intended.
Conclude that internal auditing is an example of Monitoring Activities within the five components of internal controls.
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