Multiple Choice
Which of the following statements is FALSE with regards to the five components of internal controls?
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6. Internal Controls and Reporting Cash
Five Components of Internal Controls
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Which of the following is NOT a component of internal control as defined by COSO?
A
Control Environment
B
Financial Reporting
C
Information and Communication
D
Risk Assessment
Verified step by step guidance1
Understand the COSO framework: COSO (Committee of Sponsoring Organizations of the Treadway Commission) defines internal control as a process designed to provide reasonable assurance regarding the achievement of objectives in operations, reporting, and compliance.
Identify the five components of internal control according to COSO: These are Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities.
Analyze the options provided in the question: Compare each option to the five components of internal control defined by COSO.
Recognize that 'Financial Reporting' is not one of the five components of internal control. While financial reporting is an objective of internal control, it is not classified as a component within the COSO framework.
Conclude that the correct answer is 'Financial Reporting' because it does not align with the COSO-defined components of internal control.
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