Inadequate Controls and Misstatements Discovered Through Tests of Controls and Substantive

question 57

Multiple Choice

Inadequate controls and misstatements discovered through tests of controls and substantive tests of transactions are an indication of the likelihood of misstatements in:

• A) the balance sheet.
• B) the income statement.
• C) the cash flow statement.
• D) both the income statement and the balance sheet.

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Definitions:

Bank Errors

Mistakes made by a bank in the processing of transactions, which can include errors in deposits, withdrawals, or charges that affect account balances.

Adjusting Entry

Journal entries made at the end of an accounting period to allocate revenues and expenses to the period in which they actually occurred.

NSF Check

A Non-Sufficient Funds (NSF) check is a check that cannot be processed because the account it is drawn on does not have enough funds.

Adjusting Entry

An accounting entry made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.