Deck 3: Internal Controls

Question 1

Deficiencies in controls can be of two types: deficiencies in design and deficiencies in operation.A deficiency in operation exists when a control is either missing or does not operate as designed.

Answer 1

False

Question 2

Management might develop controls related to:

A)segregation of duties between members involved in implementing and recording transactions.
B)procedures to recognize transactions.
C)requirements for documented transaction trails before transactions can be posted.
D)physical controls that provide access to assets.

Answer 2

C

Question 3

The auditing standards allow the auditor to use the work of the internal auditors to gather evidence about the effectiveness of internal controls.

Answer 3

True

Question 4

During an audit,the auditor may become aware of deficiencies in the internal control functions of a client that may be of interest to the audit committee of the company.

Question 5

Which of the following is a correct statement about internal controls?

A)The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the COSO financial reporting framework.
B)Management develops internal controls to prevent misstatements in the financial statements.
C)The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in preventing misstatements.
D)The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide reasonable assurance that company responsibilities are met.

Question 6

Which of the following is a correct statement about internal controls?

A)The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the COSO financial reporting framework.
B)Management develops internal controls to prevent misstatements in the financial statements.
C)The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in preventing or detecting misstatements.
D)The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide assurance that company responsibilities are met.

Question 7

The corporate governance process is designed to provide outsiders with information needed to make decisions about the company.

Question 8

The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide reasonable assurance that company responsibilities are met.Which of the following is not one of those areas?

A)The reliability of financial reporting.
B)The earning of net income.
C)The effectiveness and efficiency of operations.
D)The compliance with laws and regulations.

Question 9

Which of the following is a correct statement about internal controls?

A)The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the COSO financial reporting framework.
B)Management develops internal controls to prevent or detect misstatements in the financial statements.
C)The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in detecting misstatements.
D)The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide assurance that company responsibilities are met.

Question 10

The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the applicable financial reporting framework.

Question 11

Which of the following is a correct statement about internal controls?

A)The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the applicable financial reporting framework.
B)Management develops internal controls to prevent misstatements in the financial statements.
C)The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in detecting misstatements.
D)The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide assurance that company responsibilities are met.

Question 12

Management might develop controls related to:

A)segregation of duties between members involved in initiating,approving,implementing and recording transactions.
B)procedures to recognize transactions.
C)requirements for documented transaction trails after transactions are posted.
D)physical controls that provide access to assets.

Question 13

Management might develop controls related to:

A)segregation of duties between members involved in implementing and recording transactions.
B)procedures to recognize transactions.
C)requirements for documented transaction trails after transactions can be posted.
D)physical controls that limit access to assets.

Question 14

During the planning process as the auditor obtains an understanding of the audit client,the auditor should also gain an understanding of how the client uses the service organization.

Question 15

COSO's Enterprise Risk Management - Integrated Framework,the most widely used internal control framework in the U.S. ,lists four objectives of the internal control function.

Question 16

At the end of an audit after the opinion is issued,the auditor should have sufficient appropriate evidence to reduce audit risk to a low level.

Question 17

Internal controls performed by employees,rather than by computers,are subject to several types of errors.Internal controls performed by computers do not make errors.

Question 18

In a financial statement audit,the auditor will decide to either (1)rely on internal controls in the company to prevent or detect misstatements or (2)make recommendations to the client so that controls can be relied upon.

Question 19

Management might develop controls related to:

A)segregation of duties between members involved in implementing and recording transactions.
B)procedures to authorize transactions.
C)requirements for documented transaction trails after transactions can be posted.
D)physical controls that provide access to assets.

Question 20

Management is responsible for the development of internal controls over the financial reporting process.These controls must be effective throughout the year and are mandated by the Sarbanes-Oxley Act for all public companies.

Question 21

Which of the following is not a subdivision of the COSO component "control environment?"

A)Integrity and ethical values
B)Management organization
C)Human resources policies and procedures
D)Commitment to competence

Question 22

Define the COSO component "Monitoring"

A)to identify risks to the entity's ability to achieve its objectives
B)the procedures used by the company to help it achieve its objectives
C)systems to exchange the information needed to make decisions
D)to determine whether internal controls effectively prevent misstatements or detect misstatements in the financial statements

Question 23

Compensating controls

A)occur before the transaction is complete.
B)are controls used by auditors to offset the risk in another procedure.
C)are used because it is cost effective to implement particular control procedures.
D)to be effective,will likely detect misstatements in a timely fashion.

Question 24

Define the COSO component "Information and Communications"

A)to identify risks to the entity's ability to achieve its objectives
B)the procedures used by the company to help it achieve its objectives
C)systems to exchange the information needed to make decisions
D)to determine whether internal controls effectively prevent misstatements or detect misstatements in the financial statements

Question 25

Compensating controls

A)occur before the transaction is complete.
B)are controls used by auditors to offset the risk in another procedure.
C)are used because it is not cost effective to implement particular control procedures.
D)if effective will prevent misstatements in a timely fashion.

Question 26

Which of the following would not be associated with the entity's risk assessment?

A)new or revamped information systems
B)new business models
C)new internal auditing methods
D)corporate restructuring

Question 27

A company may have information systems that use automated procedures to

A)test the validity of transactions
B)increase the rate of return on an investment
C)determine which customer provides the highest quality product
D)initiate,record,process,and report transactions

Question 28

Which of the following are specific factors evaluated under the COSO component "control activities?"

A)separation of transactions from the authorization of documents
B)proper authorization of transactions and activities
C)separation of IT duties from user departments
D)physical control over checks on performance and independent control over records
E)both A and B
F)both B and C
G)both A and D

Question 29

Which of the following is included in the COSO component "information and communications?"

A)capturing events and conditions significant to the financial statements
B)the procedures and records established to initiate,record,process,and report entity transactions
C)specific accounts in the financial statements used for initiating,recording,processing and reporting transactions
D)all of the above

Question 30

Compensating controls

A)occur before the transaction is complete.
B)are controls used by management to offset the risk in another procedure.
C)are used because it is cost effective to implement particular control procedures.
D)if effective will prevent misstatements in a timely fashion.

Question 31

Management is responsible for designing the controls and the auditor is responsible for

A)testing them only if he chooses to rely on them to prevent or detect misstatements in the account balances.
B)testing them only if he chooses to rely on them to prevent or detect misstatements in the transactions.
C)testing them only if he chooses to rely on them to prevent or detect misstatements in the financial statements.
D)testing them only if he chooses to rely on them to prevent or detect misstatements in the management representations.

Question 32

The auditor has a variety of auditing techniques that might be used to gather evidence about the effectiveness of control.These include

A)confirmation of the application of the control
B)gathering of documents,reports,or computer files
C)observation of the application of the control
D)inspecting the control again

Question 33

The auditor has a variety of auditing techniques that might be used to gather evidence about the effectiveness of control.These include

A)inquiries of company management
B)gathering of documents,reports,or computer files
C)confirmation of the application of the control
D)performing the control again

Question 34

COSO's Enterprise Risk Management - Integrated Framework,the most widely used internal control framework,lists five components of the internal control function.They are

A)risk assessment,control activities,misstatement identification,information and communications,and monitoring
B)control activities,risk assessment,misstatement identification,information and communications,and monitoring
C)control environment,risk assessment,control activities,information and communications,and monitoring
D)control environment,risk assessment,control activities,misstatement identification,and monitoring

Question 35

Define the COSO component "Risk Assessment"

A)to identify risks to the entity's ability to achieve its objectives
B)the procedures used by the company to help it achieve its objectives
C)systems to exchange the information needed to make decisions
D)to determine whether internal controls effectively prevent misstatements or detect misstatements in the financial statements

Question 36

A company using COSO's enterprise risk management framework would first consider risk at

A)the business process level
B)the balance level
C)the account level
D)the overall company level

Question 37

The auditor has a variety of auditing techniques that might be used to gather evidence about the effectiveness of control.These include

A)inquiries of company management
B)inspection of documents,reports,or computer files
C)confirmation of the application of the control
D)inspecting the control again

Question 38

Compensating controls

A)occur after the transaction is complete.
B)are controls used by auditors to offset the risk in another procedure.
C)are used because it is cost effective to implement particular control procedures.
D)if effective will prevent misstatements in a timely fashion.

Question 39

Define the COSO component "Control Activities"

A)to identify risks to the entity's ability to achieve its objectives
B)the procedures used by the company to help it achieve its objectives
C)systems to exchange the information needed to make decisions
D)to determine whether internal controls effectively prevent misstatements or detect misstatements in the financial statements

Question 40

The auditor has a variety of auditing techniques that might be used to gather evidence about the effectiveness of control.These include

A)inquiries of company employees
B)gathering of documents,reports,or computer files
C)confirmation of the application of the control
D)inspecting the control again

Question 41

When the client uses a service organization,the auditor obtains evidence by one or more of the following methods:

A)obtain a report prepared by the auditor of the service organization that describes the service organization's system
B)request the management of the service organization to perform test of controls at the direction of the auditor
C)perform substantive tests of transactions at the service organization
D)perform tests of the client's controls over the activities performed by the service organization

Question 42

The auditor uses professional judgment to determine whether sufficient appropriate audit evidence has been obtained to reduce audit risk to an acceptable low level.The audit evidence might come from

A)internal control evidence
B)substantive tests of controls
C)a combination of internal control evidence and substantive evidence
D)a combination of substantive tests and analytical procedures

Question 43

To understand the relevant internal controls of the company,the auditor should understand the following areas of the company:

A)the management environment
B)the risk assessment process
C)the information system including the business processes relevant for financial reporting
D)how the company communicates internal control roles and responsibilities
E)how the company has controlled risks arising from IT
F)both A and B
G)both B and C
H)both C and D

Question 44

What type of report(s)do auditors of a service organization prepare?

A)Type I report describes the service organization's controls and evaluates whether they are appropriate to achieve specific control objectives
B)Type II contains the results of internal control tests conducted by the service organization to determine whether the controls provide reasonable assurance that the control objectives were achieved
C)Type II contains the information in a Type I report and the results of internal control tests conducted by the service organization to determine whether the controls provide reasonable assurance that the control objectives were achieved
D)Type III contains an overall evaluation of the complete internal control structure as required by Sarbanes-Oxley
E)All of the above
F)A,B,and C

Question 45

Which of the following best describes the COSO component "monitoring?"

A)internal auditors are responsible for monitoring internal controls to make sure they are operating as intended
B)external auditors are responsible for monitoring internal controls to make sure they are operating as intended
C)user departments are responsible for monitoring internal controls to make sure they are operating as intended
D)management is responsible for monitoring internal controls to make sure they are operating as intended

Question 46

To understand the relevant internal controls of the company,the auditor should understand the following areas of the company:

A)the control environment
B)the auditor's risk assessment process
C)the information system including the business processes relevant for internal control
D)how the company communicates internal control roles and responsibilities
E)how the company has responded to risks arising from IT
F)both A and B
G)both A and C
Both A and E

Question 47

To understand the relevant internal controls of the company,the auditor should understand the following areas of the company:

A)the control environment
B)the auditor's risk assessment process
C)the information system including the business processes relevant for internal controls
D)how the company communicates financial reporting roles and responsibilities
E)how the company has controlled risks arising from IT
F)both A and B
G)both A and C
Both A and D
I)both A and E

Question 48

When the client uses a service organization,the auditor obtains evidence by one or more of the following methods:

A)obtain a report prepared by the auditor of the service organization that describes the service organization's system
B)request the management of the service organization to perform test of controls at the direction of the auditor
C)perform tests of controls at the service organization
D)perform tests of the service organization's controls over the activities performed by the client

Question 49

When the client uses a service organization,the auditor obtains evidence by one or more of the following methods:

A)obtain a report prepared by the auditor of the service organization that describes the service organization's system,evaluates the appropriateness of the design of internal controls and tests the operating effectiveness of the controls
B)request the management of the service organization to perform test of controls at the direction of the auditor
C)perform substantive tests of transactions at the service organization
D)perform tests of the service organization's controls over the activities performed by the client organization

Question 50

Which of the following examples of dual purpose tests are correct?

A)they give the auditor evidence that the financial statements are free from material misstatements
B)they give the auditor evidence about whether a control is operating effectively
C)they give the auditor evidence of reasonable assurance that the financial statements are free from material misstatements
D)they give the auditor evidence that the financial statements are fairly presented
E)they give the auditor evidence to detect misstatements in the financial statements
F)both A and C
G)both A and D
Both B and E
I)both C and D

Question 51

When an audit client uses a service organization,the auditor is required to

A)have appropriate competence and capabilities to review the service organization
B)obtain an understanding of the nature and significance of the services provided by the service organization and the design and operation of the relevant controls performed by the service organization
C)comply with relevant independence and fraud detection requirements
D)maintain professional appearance and exercise professional judgment

Question 52

When the client uses a service organization,the auditor obtains evidence by one or more of the following methods:

A)obtain a report prepared by the auditor of the service organization that describes the service organization's system
B)request the auditor of the service organization to perform test of controls at the direction of the auditor
C)perform substantive tests of transactions at the service organization
D)perform tests of the service organization's controls over the activities performed by the client

Question 53

To understand the relevant internal controls of the company,the auditor should understand the following areas of the company:

A)the management environment
B)the auditor's risk assessment process
C)the information system including the business processes relevant for internal controls
D)how the company communicates internal control roles and responsibilities
E)how the company has responded to risks arising from IT

Question 54

To understand the relevant internal controls of the company,the auditor should understand the following areas of the company:

A)the management environment
B)the risk assessment process
C)the information system including the business processes relevant for internal control
D)how the company communicates internal control reporting roles and responsibilities
E)how the company has controlled risks arising from IT

Question 55

Which of the following are examples of internal control tests used by the auditor to gather evidence about the effectiveness of internal controls?

A)external confirmation
B)inquiries of employees
C)recalculation
D)analytical procedures
E)reperformance of the control
F)both A and C
G)both A and D
Both B and E
I)both C and D

Question 56

Which of the following is a correct statement about the responsibility for internal controls?

A)The Sarbanes-Oxley Act made management responsible for internal controls.
B)The Foreign Corrupt Practices Act made management responsible for internal controls.
C)The American Institute of Certified Public Accountants made management responsible for internal controls.
D)The International Auditing and Assurance Standards Board made management responsible for internal controls.

Question 57

When the client uses a service organization,the auditor obtains evidence by one or more of the following methods:

A)obtain a report prepared by the auditor of the service organization that describes the service organization's system
B)obtain a report prepared by the auditor of the service organization that evaluates the appropriateness of the design of internal controls
C)request the management of the service organization to perform test of controls at the direction of the auditor
D)perform tests of controls at the service organization
E)perform tests of the client's controls over the activities performed by the service organization
F)both A and B
G)both C and D
Both D and E

Question 58

Which of the following are examples of internal control tests used by the auditor to gather evidence about the effectiveness of internal controls?

A)external confirmation
B)observation of the application of the control
C)inspection of documents,reports,and computer files
D)analytical procedures
E)reperformance
F)both A and C
G)both A and D
Both B and E
I)both C and D

Question 59

Select the items that best describe an "integrated audit."

A)integrated audits are performed on all companies issuing financial statements
B)under Sarbanes-Oxley,the auditor performs test of controls that the auditor plans to rely on
C)the documentation requirements are the same for stock issuers and non-issuers
D)the auditor provides an opinion on the effectiveness of internal controls over financial reporting
E)the auditor must test internal controls
F)both A and B
G)both C and D
Both D and E

Question 60

If it is necessary in an auditor's report to make reference to the work of the service auditor for outsiders to understand the audit report,then

A)the auditor's report should indicate that the responsibility is shared with the service organization auditor.
B)the auditor should state that the service auditor is responsible for the audit opinion.
C)the service auditor's audit report contained a subject to opinion.
D)the auditor's report must state that the auditor of the company using the service organization is responsible for the audit opinion.

Question 61

The auditor must communicate in writing all significant deficiencies and material weaknesses to management and the audit committee.The written communication from the auditor should include:

A)a definition of a control deficiency and a material weakness
B)a statement that the objective of the audit is to report on the financial statements and not to provide assurance on internal controls
C)a statement that the communication is intended solely for the use of stockholders,the board of directors,the audit committee,and management
D)a statement that there is no such thing as absolute assurance

Question 62

A significant deficiency is:

A)a control deficiency or a combination of control deficiencies that adversely affects the company's ability to initiate,authorize,record,process,or report internal financial data reliably in accordance with an applicable financial reporting framework
B)a control deficiency or a combination of control deficiencies that adversely affects the company's ability to initiate,authorize,record,process,or report external financial data reliably in accordance with an applicable financial reporting framework
C)a control deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement in the financial statements would not be prevented or detected
D)a control deficiency or combination of control deficiencies that results in a remote likelihood that a material misstatement in the financial statements would not be prevented or detected

Question 63

For public companies in the U.S. ,which statement is not correct?

A)Management is responsible for the development of internal controls and the financial reporting process.
B)Internal controls over the financial reporting process are only effective as of year-end.
C)These controls are designed to assure that the internal control process of a company is effective.
D)Effective financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

Question 64

For public companies in the U.S. ,which statement is correct?

A)The auditor is responsible for the development of internal controls and the financial reporting process.
B)Internal controls over the financial reporting process are only effective as of year-end.
C)Internal controls over the financial reporting process are designed to assure that the financial reporting process of a company is effective.
D)Effective internal controls over financial statements provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements.

Question 65

The internal control deficiencies identified in a financial statement audit may be reported in several ways.Which of the following are not appropriate methods of reporting?

A)Significant deficiencies are reported in writing to management.
B)Material weaknesses are reported in writing to the audit committee.
C)Deficiencies that fail to reach the level of significant deficiencies or material weaknesses may be reported to management.
D)Significant deficiencies and material weaknesses are reported in writing to both management and the audit committee.

Question 66

Which of the following statements about internal controls are correct?

A)It is possible to have perfect (materially correct)financial statements and no internal controls.
B)It is possible to have perfect internal controls and materially incorrect financial statements.
C)Testing internal controls answers the question,"Are the financial statements correct?"
D)Control tests answer the question,"Are the account balances correct?"
E)Both A and B
F)Both C and D

Question 67

What information does an auditor get from an internal control test?

A)the auditor learns if the control is operating effectively
B)the auditor learns if the system of controls is operating effectively
C)the auditor learns if the control is present
D)the auditor learns if a system of internal controls is present

Question 68

The internal control deficiencies identified in a financial statement audit may be reported in which of the following ways?

A)Significant deficiencies are reported in a management letter.
B)Material weaknesses are verbally reported to the audit committee.
C)Deficiencies that fail to reach the level of significant deficiencies or material weaknesses are reported in a management letter.
D)Significant deficiencies and material weaknesses may be verbally reported to both management and the audit committee.

Question 69

Which of the following statements about internal controls are correct?

A)It is possible to have perfect (materially correct)financial statements and no internal controls.
B)It is not possible to have perfect internal controls and materially incorrect financial statements.
C)Testing internal controls answers the question,"Are the financial statements correct?" It only answers the question,"Are the controls working to prevent or detect misstatements in the financial statements?"
D)Substantive tests answer the question,"Are the account balances correct?"
E)Both A and B
F)Both A and D
G)Both B and D

Question 70

The auditor must communicate in writing all significant deficiencies and material weaknesses to management and the audit committee.The written communication from the auditor should include:

A)a definition of a significant deficiency and a material weakness
B)a statement that the objective of the audit is to report on the financial statements and to provide assurance on internal controls
C)a statement that the communication is intended solely for the use of stockholders,the board of directors,the audit committee,and management
D)a statement that there is no such thing as absolute assurance

Question 71

For public companies in the U.S. ,which statement is correct?

A)Auditors and management are jointly involved in designing tests of internal controls over financial reporting.
B)Management is not required to identify controls related to the financial reporting process.
C)The auditor reviews management's assessment of internal controls and expresses an opinion on the effectiveness of the company's internal controls over financial reporting.
D)The accounting firm performing the financial statement audit is not permitted to perform the audit of internal controls over financial reporting.

Question 72

A material weakness is:

A)a control deficiency or a combination of control deficiencies that adversely affects the company's ability to initiate,authorize,record,process,or report internal financial data reliably in accordance with an applicable financial reporting framework
B)a control deficiency or a combination of control deficiencies that adversely affects the company's ability to initiate,authorize,record,process,or report external financial data reliably in accordance with an applicable financial reporting framework
C)a significant deficiency or combination of significant deficiencies that results in a remote likelihood that a material misstatement in the financial statements would not be prevented or detected
D)a significant deficiency or combination of significant deficiencies that result in more than a remote likelihood that a material misstatement in the financial statements would not be prevented or detected

Question 73

Which of the following statements about internal controls are correct?

A)It is not possible to have perfect (materially correct)financial statements and no internal controls.
B)It is possible to have perfect internal controls and materially incorrect financial statements.
C)Testing internal controls answers the question,"Are the financial statements correct?" It only answers the question,"Are the controls working to prevent or detect misstatements in the financial statements?"
D)Control tests answer the question,"Are the account balances correct?"
E)What companies say they do is often quite different from what they actually do.F.Both A and B
G)Both B and E
H)Both C and D

Question 74

The auditor must communicate in writing all significant deficiencies and material weaknesses to management and the audit committee.The written communication from the auditor should include:

A)a definition of a control deficiency,a significant deficiency,and a material weakness
B)a statement that the objective of the audit is to report on the financial statements and not to provide assurance on internal controls
C)a statement that the communication is intended solely for the use of the board of directors,the audit committee,and management
D)the fact that there is no such thing as absolute assurance

Question 75

Which of the following statements about internal controls are correct?

A)It is not possible to have perfect (materially correct)financial statements and no internal controls.
B)It is not possible to have perfect internal controls and materially incorrect financial statements.
C)Testing internal controls answers the question,"Are the financial statements correct?"
D)Substantive tests answer the question,"Are the account balances and classes of transactions correct?"
E)What companies say they do is often quite different from what they actually do.F.Both A and B
G)Both C and D
Both D and E

Question 76

For public companies in the U.S. ,which statement is correct?

A)Auditors and management are jointly involved in designing tests of internal controls over financial reporting.
B)Management is required to identify controls related to the financial reporting process and to test the controls to determine whether they are effective at year-end.
C)The auditor expresses an opinion on the effectiveness of the company's internal controls over the financial statements.
D)The accounting firm performing the financial statement audit must not perform the audit of internal controls over financial reporting.

Question 77

For public companies in the U.S. ,which statement is correct?

A)Auditors and management are involved in testing of internal controls over financial reporting.
B)Management hires the auditor to design internal controls related to the financial reporting process.
C)The audit opinion on the financial statements must be the same as the audit opinion on the financial reporting process.
D)The accounting firm performing the financial statement audit does not perform the audit of internal controls over financial reporting.

Question 78

Which of the following statements about internal controls are correct?

A)It is not possible to have perfect (materially correct)financial statements and no internal controls.
B)It is possible to have perfect internal controls and materially incorrect financial statements.
C)Testing internal controls does not answer the question,"Are the financial statements correct?" It only answers the question,"Are the controls working to prevent or detect misstatements in the financial statements?"
D)Control tests answer the question,"Are the account balances correct?"
E)Both A and B
F)Both B and C
G)Both C and D

Question 79

For public companies in the U.S. ,which statement is correct?

A)Management is responsible for the development of internal controls over the financial reporting process.
B)Internal controls over the financial reporting process are only effective as of year-end.
C)Internal controls over the financial reporting process are designed to assure that the internal control process of a company is effective.
D)Effective internal control reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

Question 80

For public companies in the U.S. ,which statement is correct?

A)The auditor is responsible for the development of internal controls and the financial reporting process.
B)Internal controls over the financial reporting process must be effective as of year-end.
C)Internal controls over the financial reporting process are designed to assure that the internal control process of a company is effective.
D)Effective internal control reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.