The Purpose of Tests of Controls Is to Determine That

question 23

Multiple Choice

The purpose of tests of controls is to determine that:

• A)Internal control policies and procedures are functioning as prescribed.
• B)The extent of further audit procedures can be reduced.
• C)Errors and irregularities are prevented or detected in a timely manner.
• D)The auditor has an understanding of internal control.

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Definitions:

Continuously Compounded Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Simple Interest

Interest earned only on the original principal amount invested.

Annually Compounded Interest

Interest on a loan or investment that is calculated once a year, adding the interest to the principal sum and basing future interest calculations on this new principal.

Amortized Daily Interest

Interest on a loan computed each day using the balance of the loan on that day, leading to a variable interest charge per billing period.