6. Internal Control - Sales-Receivables-Cash Receipts Cycle

Question 1

What do tests of completeness determine?

Answer 1

Whether all assets, liabilities, and equity interests are recorded properly. They emphasize the events rather than the existence of the documents.

Question 2

What does bonding employees do?

Answer 2

Internal control does not guarantee against losses from embezzlement and other fraudulent acts committed by employees

Question 3

What is observation used for?

Answer 3

For risk assessment to obtain an understanding of the entity and its environment, including its controls.