Question

The purpose of tests of controls is to provide reasonable assurance that ____.

a. the entity has complied with requirements of quality control.
b. internal control procedures are functioning as intended.
c. the entity has complied with GAAP disclosure requirements.
d. accounting treatment of transactions and balances is valid and proper.

Answer 1

b.

Step-by-step explanation:

The purpose of tests of controls is to provide reasonable assurance that internal control procedures are functioning as intended. There are seven internal control procedures that need to be functioning correctly, these are the following.

• separation of duties
• access controls
• physical audits
• standardized documentation
• trial balances
• periodic reconciliations
• approval authority

The tests of control make sure that no problems arise during each and every one of these procedures in order for everything to run smoothly and legally.