Which of the following accurately describes internal control? (Several choices may be correct.) Process designed and...

Which of the following accurately describes internal control? (Several choices may be correct.)

Process designed and implemented by those charged with governance and the management of the company.

Process maintained and improved by external auditors.

Objective is to provide reasonable assurance the company is achieving its objectives.

Objective is to provide an absolute assurance the company is providing accurate financial reporting.

External auditors are required to gain an understanding of the process

Solutions

Expert Solution

The correct answer for the question is Option A - Process designed and implemented by those charged with governance and the management of the company. Internal controls are processes established by the management and those charged with governance of the company in order to ensure that the scope for fraud is minimized and that the functioning of the company takes place efficiently. Internal controls help the management and those charged with governance to understand

Option C is correct - Objective is to provide reasonable assurance the company is achieving its objectives. The objective of the Internal controls is to provide a reasonable assurance that the company is working towards achieving its objectives.

Option E is correct - External auditors are required to gain an understanding of the process. As part of their unerstanding of the process and the audit procedures, the external auditors are required to obtain an understanding of Internal control procedures. Effective internal control might reduce the level of testing that is required to be performed by the auditors and vice-versa.

Option D is incorrect - Internal controls cannot provide absolute assurance that the company is accurately providing its financial reporting. Hence, this option is incorrect.

Option B s incorrect. The internal controls are maintained by the management. External auditors generally test internal controls as part of their testing procedures but are not required to improve them. They generally just opine on the internal controls.

Please let me know if you have any questions via comments and all the best :) !

ekkarill92 answered 1 year ago

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