Important Objectives of a System of Internal Controls Are to Safeguard

question 59

Essay

Important objectives of a system of internal controls are to safeguard assets and to enhance the accuracy and reliability of the accounting records. Briefly discuss how (1) cost-benefit considerations, (2) the human element, and (3) the size of the business affect the implementation of a system of internal controls.

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Definitions:

Financial Interests

Refers to the ownership stake or economic benefits that an individual or entity has in an asset or a transaction.

Agency Costs

The costs associated with resolving conflicts of interest between company management and shareholders.

Sole Proprietorship

A business owned by a single individual.

CSR Activity

Corporate social responsibility activities involve companies taking responsibility for their impact on society and the environment, often beyond what is legally required.