The Purpose of Tests of Controls Is to Provide Reasonable

question 34

Multiple Choice

The purpose of tests of controls is to provide reasonable assurance that the

• A) accounting treatment of transactions and balances is valid and proper.
• B) internal control procedures are functioning as intended.
• C) entity has complied with GAAP disclosure requirements.
• D) entity has complied with requirements of quality control.

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Definitions:

Effective Interest Method

A technique used in accounting to allocate the discount or premium on bonds payable over their life to interest expense, reflecting a constant rate of interest.

Semiannual

Happening every six months or twice annually.

Par Value

The nominal or face value of a bond, share of stock, or another security, as stated by the issuer.

Interest Expense

The cost incurred by an entity for borrowed funds, represented as interest payments on debt.