[Anonymous]

This is from B1 from the Becker Review. I’ve read over the explanations, but even after doing so, I’m at a loss on how im supposed to pick the right answer if i saw this on an actual exam. Any tips on attacking questions like this? Here’s the question:

As a matter of policy, all correspondence to or from regulatory auditors received by the management of the Barclay Corporation is provided to the Barclay Corporation audit committee and the corporation’s full board as needed. In assessing entity wide controls, management might conclude:

a.The company’s organization structure supports effective internal control over financial reporting.
b. Management’s philosophy and operating style support achieving effective internal control over financial reporting.
c. Management and employees are assigned appropriate levels of authority and responsibility to facilitate effective internal control over financial reporting.
d. The Board of Directors understands and exercises oversight responsibility related to financial reporting and related internal control.

The answer was D

[Anonymous]

Another one where the answers are all ridiculously reasonable:

Auburndale Corporation has a corporate compliance program that allows employees the option of anonymously reporting violations of laws, rules, regulations, policies or other issues of abuse through a hotline. Reported issues are reviewed by the internal auditor and either immediately forwarded to the CEO or summarized and reported to the CEO each month. The program also provides opportunities to report through supervisory channels and includes a biannual training class that all employees must complete. The corporate compliance program demonstrates that:

a. The Board of Directors understands and exercises oversight responsibility related to financial reporting and related internal control.

b. Management and employees are assigned appropriate levels of authority and responsibility to facilitate effective internal control over financial reporting.
c. Sound integrity and ethical values are developed and understood and set the standard of conduct for financial reporting.
d. Management's philosophy and operating style support achieving effective internal control over financial reporting.

Answer to this one was C. Am I missing something or are these questions borderline crazy?

[thegoldstandard]

When I was studying for BEC, I was able to understand this question by looking at it this way. This question specifically is addressing the Control Environment of internal controls which has the following principles (EBOCA): Ethics, Board Independence and Oversight, Organizational Structure, Competence, and Accountability. I believe answer choices A, B, and C are all related to the Organizational Structure component. However, choice D is specifically talking about the Board of Directors, which you can see is definitely related to BOARD (board of directors) oversight.

Looking back at the question, we read that all correspondence received by management coming from the auditors is provided TO the audit committee (which is part of the Board of directors) as needed. This is important because we know that A) the audit committee MUST be independent members of the board and B) the regulatory auditors are NOT allowed to be directly overseen by the board of directors. With management providing the auditor's correspondence to the board, this is effectively maintaining BOTH the independence and oversight of the board of directors since they can still indirectly oversee important information from the audit without the auditors reporting it directly to them (which would not be allowed).

Phew! That was a long-winded explanation. I cannot stress enough how CRITICAL it is that you remember COSO down to a T. Make sure you understand it as thoroughly as you can. If all else fails, like I said answer D is pretty much the only answer that very obviously relates to a different aspect of the Control Environment than the rest.

Hope this helped a bit!

BEC 8/12/16: TBD
FAR: TBD
REG: TBD
AUD: TBD

[Anonymous]

This was extremely helpful. Thank you so much! I have BEC in about 10 days and im in the review process at the moment. any tips/areas that i should emphasize outside of COSO?

[Author]

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