ACCY 131 PG-2a Solutions

ACCY 131 PG-2a Solutions - GroupProblemSet#2(PG2)

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Group Problem Set #2 (PG 2) Review Questions (6 points total; 1 point each) 7 1 What is internal control? ANS: Internal control is a process, effected by the entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the categories of (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, and (3) compliance with applicable laws and regulations. 7 4 How does separation of the record keeping function from custody of assets contribute to internal control? ANS: Separating recordkeeping from custody of the related assets provides an independently maintained record that may periodically be reconciled with assets on hand. This independent record holds the personnel of a custodial department accountable for assets entrusted to their care. If the custodial department maintained the accounting records, opportunity would exist for that department to conceal its errors or shortages by manipulating the records. 7 16 Under what circumstances are tests of controls effective audit procedures? ANS: Tests of controls are efficient auditing procedures when the reduction in the substantive procedures that results from a lower assessed level of control risk exceeds the amount of work
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ACCY 131 PG-2a Solutions - GroupProblemSet#2(PG2)

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