ACCA Strategic Business Leader (SBL) Practice Exam

What are the key categories of COSO?

1. Control environment, control processes, internal reports, assessments

2. Control activities, control reporting, internal audits, and monitoring.

3. Control environment, control activities, control reporting, and monitoring.

4. Risk assessment, compliance measures, control reporting, and governance.

The correct answer is: Control environment, control activities, control reporting, and monitoring.

The correct answer identifies the essential components of the COSO framework, which is widely recognized for its role in helping organizations design and implement effective internal control systems. Specifically, the COSO framework includes: 1. Control Environment: This forms the foundation for all other components of internal control and encompasses the governance structure, ethical values, and the overall culture of the organization. 2. Control Activities: These are the specific policies and procedures that help ensure that management directives are carried out effectively, including approvals, authorizations, verifications, and reconciliations. 3. Control Reporting: This term generally refers to the methods used to communicate the effectiveness and results of internal controls to relevant stakeholders, ensuring transparency and accountability. 4. Monitoring: This component involves ongoing evaluations, separate evaluations, or a combination of both to ensure that controls are operating effectively over time. Understanding these components is critical for organizations aiming to enhance their risk management and internal control practices. The other options offered do not accurately reflect the COSO categories or include non-standard terms that do not align with the recognized framework, making them less suitable in conveying the essential elements of effective internal control as defined by COSO.