In the Context of Internal Controls, Which Three of the Following

question 105

Multiple Choice

In the context of internal controls, which three of the following are true of a smaller entity? (choose three options)

• A)It has limitations surrounding its ability to put effective internal controls in place.
• B)The small number of its employees limits its ability to segregate duties.
• C)The risk of management override can be reduced by establishing documented policies and procedures.
• D)It is easier for smaller entities to have a paper trail of documentation supporting an assessment of internal controls.

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Definitions:

Rate of Return

The increase or decrease in the value of an investment, shown as a percentage of the original amount invested, over a given timeframe.

Floatation Costs

Flotation costs are the expenses incurred by a company in issuing new securities, including fees and commissions paid to underwriters, legal fees, and registration fees.

After-Tax Cost of Debt

This refers to the net cost of debt considering the effect of taxes, representing the actual financial cost of debt to a company after tax deductions.

Yield-to-Maturity

The total anticipated return on a bond if held until it matures, accounting for its current market price, face value, interest payments, and time to maturity.