Internal controls are policies and procedures defined by the management to ensure the smooth functioning of the business processes. Internal controls ensure the complete and correct accounting and safeguards to the assets. To choose: The correct statement about internal controls.

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Chapter 6, Problem 6.13MCQ

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Concept Introduction:

Internal controls are policies and procedures defined by the management to ensure the smooth functioning of the business processes. Internal controls ensure the complete and correct accounting and safeguards to the assets.

To choose: The correct statement about internal controls.

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When considering internal control, an auditor must be aware of the concept ofreasonable assurance, which recognizes that the(1) employment of competent personnel provides assurance that management’scontrol objectives will be achieved.(2) establishment and maintenance of internal control is an important responsibilityof management and not of the auditor.(3) cost of internal control should not exceed the benefits expected to be derivedtherefrom.(4) separation of incompatible functions is necessary to ascertain that the internalcontrol is effective

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