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Annual Report and Financial Statements for Business Owners

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Annual Report and Financial Statements for Business Owners

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Questions and Answers

What is the primary purpose of carrying out compliance tests on internal control systems?

To identify incompetent employees
To ensure the auditor's opinion on financial statements
To limit the extent of auditors' substantive testing (correct)
To alter the system for improvement

What is the responsibility of management if there is no effective internal control system?

To rely solely on internal auditors
To ignore internal control systems
To have failed in their responsibility (correct)
To establish new control procedures

Why should internal control be cost-effective and flexible?

To reduce the number of internal control questionnaires
To accommodate changing business needs (correct)
To ensure the auditor's opinion is favorable
To make the work of internal auditors easier

What is the primary benefit of having an effective internal control system?

To ensure the organization's survival (B) Signup and view all the answers

What is the purpose of internal control questionnaires?

To bring out important characteristics of a system for effective control (D) Signup and view all the answers

What is the result of ineffective internal control systems?

Management failure (B) Signup and view all the answers

What should be established according to the recommendation?

Internal control procedures (A) Signup and view all the answers

Why should established control be properly documented?

To provide evidence of internal control effectiveness (B) Signup and view all the answers

What is the characteristic of internal control questionnaires?

It is a comprehensive method of ascertaining internal control (C) Signup and view all the answers

What is the relationship between internal control and management?

Management is responsible for internal control (A) Signup and view all the answers