Which of the following statements about internal controls are correct?
A)It is 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?"
D)Control tests answer the question,"Are the account balances correct?"
E)Both A and B
F)Both C and D

Question

Quizplus · Accepted Answer

Both statements A and B are correct. Perfect financial statements do not necessarily mean that the internal controls are effective, and perfect internal controls do not guarantee that the financial statements are accurate. Control tests are used to determine if the account balances are accurate, while testing internal controls assesses the effectiveness of the system in ensuring that financial statements are accurate.

Which of the Following Statements About Internal Controls Are Correct