Which of the Following Tests of Controls Is Useful to Test

question 67

Multiple Choice

Which of the following tests of controls is useful to test the transaction-related audit objective of posting and summarization?

• A) Observe whether monthly statements are sent.
• B) Observe unrecorded cash at a point in time.
• C) Observe whether the accountant reconciles the bank account.
• D) Observe endorsement of incoming checks.

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Definitions:

Parent Entity

A company that has control over one or more subsidiaries.

Company Tax Rate

The rate at which a company’s taxable income is taxed by the government, which varies by country and sometimes also by the type and size of the company.

Inventories

Goods owned with the intention to sell them through standard business activities, in the stage of being made for sale, or as parts or materials meant for consumption in production activities or while offering services.

Consolidation Worksheet

A tool used in the preparation of consolidated financial statements to combine the financial information of a parent company with its subsidiaries.