Of the following statements about an internal control system,which one is correct?
A) The maintenance of the system of internal control is an important responsibility of the internal auditor.
B) Administrative controls relate directly to the safeguarding of assets.
C) Because of the cost/benefit relationship, tests of controls may be applied on a test basis in some circumstances.
D) Well designed internal control activities always prevent collusion among employees.

Question

Quizplus · Accepted Answer

The cost/benefit relationship is an important consideration in determining the extent of testing of controls. In some circumstances, tests of controls may be applied on a test basis to reduce the cost of the audit. A is incorrect because while the internal auditor may play a role in the maintenance of the system of internal control, it is ultimately the responsibility of management. B is incorrect because administrative controls can relate to many aspects of an organization, not just safeguarding of assets. D is incorrect because no internal control system can completely prevent collusion, but well-designed internal controls can help detect and deter collusion.

Of the Following Statements About an Internal Control System,which One