The purpose of tests of controls is to determine that:
A) Internal control policies and procedures are functioning as prescribed.
B) Substantive procedures can be kept to a minimum.
C) Errors and irregularities are prevented or detected in a timely manner.
D) The auditor has an understanding of internal control.

Question

Quizplus · Accepted Answer

The purpose of tests of controls is to determine whether the internal control policies and procedures are functioning as prescribed. This is important because effective internal controls reduce the risk of errors and irregularities occurring in financial statements. By testing internal controls, the auditor can gain assurance that the internal control system is adequate and provides the basis for the auditor to rely on internal controls when planning the audit. Thus, Option A is the correct choice. Option B is incorrect because tests of controls do not determine the nature, timing, and extent of substantive procedures. Option C is incorrect because the detection of errors and irregularities is only one of many purposes of tests of controls. Option D is incorrect because tests of controls are used to assess the effectiveness of internal control, not to gain an understanding of internal control.

The Purpose of Tests of Controls Is to Determine That