A System of Internal Control Can Only Provide Reasonable Assurance

question 65

Multiple Choice

A system of internal control can only provide reasonable assurance, which is based on the belief that

• A) the system is infallible.
• B) the system can always detect errors and irregularities.
• C) the costs of establishing control activities should not be greater than their expected benefit.
• D) the human element is not important.

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Definitions:

Mutually Exclusive

Situations, choices, or events that cannot occur or be chosen at the same time; selecting one option excludes the possibility of the other.

WACC

The Weighted Average Cost of Capital (WACC) represents the expected average return rate a company owes its security holders for financing its assets.

NPV

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

IRR

Utilized in assessing investment opportunities within capital budgeting, the Internal Rate of Return signifies the estimated profit rate of future investments.