Q13- Principles Of Auditing (ICAN ATSWA Sept 2021 Insight)

            

Question 13:

Which of the following is NOT a reason for establishing a system of internal controls by a company?  

A. Control management spending 

B. Prevent loss of resources by fraud and other means 

C. Help achieving its performance and profitability goals 

D. Ensure reliable financial reporting 

E. Compliance with laws and regulations   

The correct answer is (A)

Past Question Review:

The operational standard (guideline) defines  internal control as “The whole system of controls, financial and otherwise, established by the management in order to carry on the business of the enterprise, in an orderly and  efficient manner, ensure adherence to management policies, safeguard the assets  and secure as far as possible the completeness and accuracy of the records". 

The importance of internal control includes:

1. They prevent errors and frauds or material  misstatement 

2. They detect errors and frauds or material misstatement. 

3. They ensure complete and adequate  recording of transactions. 

4. They ensure that all recorded transactions  are real, properly valued, related to the correct  period, properly classified, correctly authorized and posted. 

5. They help to ensure reliable financial  reporting and compliance with relevant laws,  regulations and standards. 

6. They provide management with reasonable  assurance that goals and objectives it believes  are important to the company, which are  equally important to the auditor, will be met. 

The correct answer is (A)

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