SAMPLE FINAL EXAM ESSAY QUESTIONS-WIN2009

1-a)Briefly discuss what you consider to be the major differences between preventive, detective and corrective control procedures.
b)Why should timely reports be an essential element within a company’s Internal control system and what kind of control is it?

a)Preventive control procedures are designed and implemented before an activity is performed to prevent some potential problem (e.g., the inaccurate handling of cash receipts) from occurring that relates to the activity.
Detective control procedures are designed and implemented to provide feedback to management regarding whether or not operational efficiency and adherence to prescribed managerial policies have been achieved. In other words, preventive controls should be developed prior to operating activities taking place and detective controls should be developed to evaluate if operating efficiency and adherence to policies of management have occurred after operating activities have taken place. Corrective control procedures come into play based on the findings from the detective control procedures. That is, through detective controls, corrective control procedures should be developed to identify the cause of an organization’s problem, correct any difficulties or errors resulting from the problem, and modify the organization’s processing system so that future occurrences of the problem will hopefully be eliminated or at least minimized.

b)From the standpoint of evaluating a company’s internal control system, a performance report is a type of report that provides information to management on how efficiently and effectively its company’s internal controls are functioning. The preparation of a performance report is a detective control procedure.

Performance reports should be an essential element within a company’s internal control system because in many