Compliance, Risk Management and Internal Control: Codes of Conduct, Policies, Audit, Controls and Reporting (Basics) Questions

Question 1

Code of conduct is an example of an internal policy. (True/False)

Accepted Answer

True. A **code of conduct** is an internal policy describing expected ethical behavior (concept).

Question 2

Define compliance.

Accepted Answer

**Compliance** means following applicable laws, regulations, standards and internal policies (concept).

Question 3

Risk management is the process of identifying and controlling risks. (True/False)

Accepted Answer

True. **Risk management** involves identifying, assessing and controlling risks affecting objectives (concept).

Question 4

Internal control provides reasonable assurance, not absolute assurance. (True/False)

Accepted Answer

True. Internal controls provide **reasonable assurance** because no system can eliminate all risk (concept).

Question 5

Write one objective of internal control.

Accepted Answer

One objective is reliable **financial reporting** and safeguarding of assets (any one) (concept).

Question 6

Segregation of duties is an internal control activity. (True/False)

Accepted Answer

True. **Segregation of duties** reduces errors/fraud by separating responsibilities (concept).

Question 7

Differentiate internal audit and external audit (any three points) using a table.

Accepted Answer

Differences (concept):

| Aspect | **Internal audit** | **External audit** |
|---|---|---|
| Focus | controls, processes, compliance | financial statements assurance |
| Role | continuous improvement + assurance | independent assurance to stakeholders |
| Frequency | periodic/ongoing | typically annual |

Any three differences are sufficient.

Question 8

List any three types of business risks with examples (use a table).

Accepted Answer

Any three risk types (concept/overview):

| Risk type | Example |
|---|---|
| **Operational** | supply chain disruption |
| **Compliance/legal** | regulatory violation |
| **Financial** | liquidity shortage |
| Technology/cyber | data breach |

Write any three with examples.

Question 9

Explain objectives of internal control (any three points).

Accepted Answer

Objectives (any three) (concept):

- reliability of **financial reporting**
- compliance with laws and policies
- safeguarding of assets
- efficient operations and fraud prevention (overview)

Write any three points.

Question 10

Write any three examples of control activities (use bullet points).

Accepted Answer

Examples of control activities (any three) (concept):

- **approvals** and authorization limits
- segregation of duties (maker–checker)
- reconciliations (bank/vendor/customer)
- access controls and audit trails (overview)

Write any three examples.

Question 11

Write any three key policies/documents used for compliance and governance (exam points).

Accepted Answer

Any three governance/compliance documents (concept/overview):

- **code of conduct**
- anti-bribery/anti-corruption policy
- conflict of interest disclosure policy
- whistleblowing/vigil mechanism policy
- procurement policy and vendor due diligence policy (concept)

Write any three.

Question 12

Explain compliance monitoring (any three methods) using a table.

Accepted Answer

Compliance monitoring methods (any three) (concept/overview):

| Method | How it works |
|---|---|
| **checklists/certifications** | periodic confirmations of compliance |
| internal audit reviews | tests controls and compliance |
| exception reporting | flags unusual transactions |
| corrective action tracking | ensures issues are fixed |

Write any three with one-line explanation.

Question 13

Explain compliance, risk management and internal control (exam-style) with a comparison table.

Accepted Answer

### Meaning (brief)
- **Compliance**: following laws/regulations/policies (concept)
- Risk management: identify and manage uncertainties affecting objectives (concept)
- **Internal control**: procedures to ensure reporting, compliance, asset protection (concept)

### Comparison table

| Concept | Focus | Output (concept) |
|---|---|---|
| **Compliance** | rules adherence | fewer violations/penalties |
| Risk management | risk identification/mitigation | risk register + mitigation plans |
| **Internal control** | process controls | reliable reporting + fraud reduction |

Conclusion: Together they strengthen governance and trust (concept).

Question 14

Explain internal control components (control environment, risk assessment, control activities, communication, monitoring) with a table.

Accepted Answer

### Internal control components (concept)

| Component | What it means (concept) | Example |
|---|---|---|
| **Control environment** | tone at the top, ethics, responsibility | code of conduct, accountability |
| Risk assessment | identify/prioritize risks | risk register |
| Control activities | procedures to reduce risk | approvals, segregation |
| Communication | reporting/documentation | dashboards, SOPs |
| Monitoring | review effectiveness | internal audit, follow-up |

Conclusion: Components work together to reduce errors and fraud (concept).

Question 15

Explain how audits and compliance monitoring improve governance and reporting (exam-style) with a flowchart.

Accepted Answer

### How audits/monitoring improve governance (concept)
Audits and compliance monitoring detect gaps, enforce accountability and improve reporting quality.

Flowchart:

```text
Policies/Controls -> Execution -> Monitoring/Audit -> Findings -> Corrective actions -> Improved reporting & compliance
```

Key points (any four):
- strengthens **accountability** through documented findings
- improves **transparency** via reliable reporting
- reduces fraud opportunity by fixing control weaknesses
- supports compliance and reduces penalties (overview)

Aspect	Internal audit	External audit
Focus	controls, processes, compliance	financial statements assurance
Role	continuous improvement + assurance	independent assurance to stakeholders
Frequency	periodic/ongoing	typically annual

Compliance, Risk Management and Internal Control: Codes of Conduct, Policies, Audit, Controls and Reporting (Basics)

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