A Properly Designed Internal Control System

question 9

Multiple Choice

A properly designed internal control system:

• A) Requires the use of non-computerized systems.
• B) Lowers the company's risk of loss.
• C) Eliminates the need for an audit.
• D) Insures profitable operations.
• E) Is not necessary if the company uses a computerized system.

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Definitions:

Supply Chain Risk

The potential for financial, operational, and reputational losses arising from vulnerabilities and disruptions in a company's supply chain.

Inflation Risk

The risk that the value of assets or income will be eroded as inflation diminishes the value of a country’s currency.

Firm-Based Risk

Refers to the potential for financial loss arising from factors unique to a specific company, such as management decisions, product demand, or operational efficiency.

Market-Based Risk

The risk of losses stemming from factors that affect the overall market, including fluctuations in interest rates, stock prices, and currencies.