Documents and Records Are an Important Control Activity

question 14

Multiple Choice

Documents and records are an important control activity. Which of the following statements concerning this activity is true?

• A) They serve as excellent preventive controls.
• B) Adequate accountability can exist even in their absence.
• C) The entire accounting system serves as a documentary control.
• D) They are poor detective controls.

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Definitions:

Net Operating Income

This refers to the profit realized from a business's operational activities, excluding taxes and interest.

Contribution Margin Ratio

A financial metric that measures the proportion of revenue that exceeds variable costs, indicating how much earnings can contribute towards fixed costs and profit.

Combined Margin

refers to the total margin generated by a product or entity after accounting for various types of costs, merging both gross and net margins to provide an overall profitability measure.

Fixed Expenses

Costs that do not change with the level of production or sales over a short period.