Question

Monitoring is an important component of internal control. Which of the following items would not be an example of monitoring?

A. Management regularly compares divisional performance with budgets for the division.
B. Data processing management regularly generates exception reports for unusual transactions or volumes of transactions and follows up with investigation as to causes.
C. Management has asked internal auditing to perform regular audits of the controls over cash processing.
D. Data processing management regularly reconciles batch control totals for items processed with batch controls for items submitted.

Answer 1

Option 'C', which pertains to internal auditing, is not an example of monitoring within the context of internal control systems but rather an element of the internal audit function, which evaluates the entire control framework.

Step-by-step explanation:

The question is concerning internal control within an organization and what constitutes monitoring as a component of it. Monitoring is a process that involves the regular review and analysis of controls and systems to ensure they are effective. The purpose is to ensure that an organization's operations run smoothly and that any issues are identified and addressed promptly. However, example 'C', the action where management has asked internal auditing to perform regular audits of the controls over cash processing, is an element of the internal audit function, which, although a crucial part of the overall internal control framework, is not monitoring in the same sense as the other options. This is because internal audits are more about evaluating and improving the effectiveness of risk management, control, and governance processes.