The following questions deal with tests of controls.

Choose the best response.

a. Which of the following statements relating to tests of controls is most accurate?

(1) Auditing procedures cannot concurrently provide both evidence of the effectiveness of internal control and evidence required for substantive procedures.

(2) Tests of controls ordinarily should be performed as of the balance sheet date or during the period subse¬ quent to that date.

(3) Tests of controls include observations of the proper segregation of duties that ordinarily may be limited to the normal audit period.

(4) Tests of controls should be based on proper applica¬ tion of an appropriate statistical sampling plan.

b. The two phases of the auditor's involvement with inter¬ nal control are sometimes referred to as "understanding and assessment" and "tests of controls." In the tests of controls phase, the auditor attempts to

(1) obtain sufficient appropriate audit evidence to afford a reasonable basis for the auditor's opinion.
(2) obtain assurances that informative disclosures in the financial statements are reasonably adequate.
(3) obtain a reasonable degree of assurance that the client's controls are in use and are operating as planned.
(4) obtain knowledge and understanding of the client's prescribed procedures and methods.
Which of the following is ordinarily considered a test of controls audit procedure?
(1) Send confirmation letters to banks.
(2) Obtain or prepare reconciliation of bank accounts as of the balance sheet date.
(3) Count and list cash on hand.
(4) Examine signatures on cheques.