Which one of the following is a test of controls?
A) Review the payroll journal, general ledger and payroll earnings records for large or unusual amounts.
B) Examine time cards for indication of supervisor approval.
C) Prove the bank reconciliation.
D) Reconcile payments in the payroll journal with payments on the bank statement.

Question

Quizplus · Accepted Answer

A test of controls is used to evaluate the effectiveness of a company's internal controls over financial reporting. Option B, examining time cards for indication of supervisor approval, is an example of a test of controls as it assesses whether the control designed to ensure approval of employee's time worked is functioning as intended. The other options are not tests of controls as they do not evaluate the effectiveness of internal controls aimed at mitigating the risk of material misstatements in financial statements.

Which One of the Following Is a Test of Controls