For Which of the Following Internal Controls Would an Auditor

question 56

Multiple Choice

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date?

• A) Withdrawals from Federal Bank of more than $5 million must include a manager's signature.
• B) At the end of each day at Federal Bank, the total cash in the vault is reconciled with daily registers of deposits and withdrawals.
• C) Federal Bank has just started establishing trusts for its customers and it has only set up ten. Before making an investment for a trust, bank employees must verify that the investment is in accordance with stated investment policies.
• D) On an annual basis, Federal Bank management performs credit checks on its loan customers before determining the value of loans it will not be able to collect on.

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Definitions:

Control of the Firm

Refers to the ability to influence or outright decide on the broad directions and decisions of a company, usually through possession of a significant portion of voting shares.

Shareholders

Individuals or entities that own shares in a corporation, giving them ownership interests and potentially the right to vote on corporate matters.

Board of Directors

A group of individuals elected by the shareholders of a company to oversee and make decisions on major issues and policies.

Primary Market

The market where securities are issued for the first time, allowing corporations to raise capital from investors.