Answer (D) is correct . Internal control is designed to provide reasonable assurance of the achievement of objectives in the categories of (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance with laws and regulations. Controls relevant to a financial statement audit ordinarily pertain to the objective of preparing external financial statements that are fairly presented in conformity with GAAP or another comprehensive basis of accounting.
Answer (A) is incorrect because Many factors beyond the purview of the auditor affect profits, and the controls related to operational efficiency are usually not directly relevant to an audit.
Answer (B) is incorrect because The chief accounting officer need not review all accounting transactions.
Answer (C) is incorrect because Controls relevant to a financial statement audit do not concern the treatment of corporate morale problems.
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