Which of the following statements about internal controls are correct?
A)It is not possible to have perfect (materially correct)financial statements and no internal controls.
B)It is possible to have perfect internal controls and materially incorrect financial statements.
C)Testing internal controls answers the question,"Are the financial statements correct?" It only answers the question,"Are the controls working to prevent or detect misstatements in the financial statements?"
D)Control tests answer the question,"Are the account balances correct?"
E)What companies say they do is often quite different from what they actually do.
F)Both A and B
G)Both B and E
H)Both C and D

Question

Quizplus · Accepted Answer

B and E are correct. It is possible to have perfect internal controls and still end up with materially incorrect financial statements due to factors outside the control system, such as human error or fraud. Additionally, there is often a discrepancy between a company's stated policies and procedures and their actual practices.

Which of the Following Statements About Internal Controls Are Correct