Question

15. Which of the following is incorrect regarding control environment component of internal control?

a.The foundation for the other components of internal control to function as control environment provides discipline and structure.

b.To understand the control environment, the auditor considers programs and controls addressing fraud risk implemented by management and those charged with governance.

c.The evaluation of the design of the control environment includes considering the seven elements of control environment.

d.The absence of programs and controls addressing fraud risk of control environment may not represent a material weakness.

Answer 1

Answer : Correct Option is (d.)The absence of programs and controls addressing fraud risk of control environment may not represent a material weakness.

Reason :

The absence of programs and controls addressing  fraud risk of control environment may represents a risk of material misstatement or material weakness.In control environment we evaluate whether the management has considered risk in various areas and have systems to prevent or detect the risk.Therefore The absence of programs and controls addressing fraud risk of control environment may not represent a material weakness is incorrect regarding control environment component of internal control.