When considering internal control, an auditor should be aware of the concept of reasonable assurance, which recognizes that the:
A) segregation of incompatible functions is necessary to ascertain that internal control is effective.
B) employment of competent personnel provides assurance that the objectives of internal control will be achieved.
C) establishment and maintenance of internal control is an important responsibility of the management and not of the auditor.
D) concept allows for only a remote likelihood that material misstatements will not be prevented or detected on a timely basis.

Question

Quizplus · Accepted Answer

Reasonable assurance recognizes that internal control can provide only a reasonable, not an absolute, assurance that material misstatements will be prevented or detected on a timely basis. It means that there is room for some level of error or risk in any internal control system. Choices A and B may contribute to the effectiveness of internal control, but they do not directly relate to the concept of reasonable assurance. Choice C is incorrect as the auditor also has a responsibility to evaluate the effectiveness of internal control.

When Considering Internal Control, an Auditor Should Be Aware of the Concept