Tests of controls provide an indication of the likelihood of misstatements in both the income statement and the balance sheet, simultaneously.

Question

Quizplus · Accepted Answer

Tests of controls are procedures performed to assess the effectiveness of an entity's internal controls. If the tests provide a positive result, it indicates that the controls are effective in preventing or detecting material misstatements in the financial statements. Therefore, performing tests of controls provides an indication of the likelihood of misstatements in both the income statement and the balance sheet simultaneously.

Tests of Controls Provide an Indication of the Likelihood of Misstatements