Which of the Following Is Correct

question 11

Multiple Choice

Which of the following is Correct?

• A) the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.
• B) the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.
• C) the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.
• D) the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

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Definitions:

Internal Control

Internal control comprises the procedures and measures a company undertakes to protect assets, ensure accurate financial reporting, and comply with laws and regulations.

Reasonable Assurance

This concept refers to a high level of assurance or confidence in the accuracy of financial statements and internal controls without guaranteeing 100% certainty.

Error Recording

Error recording is the process of documenting mistakes and inaccuracies found in financial statements or transactions to analyze and correct them.

Bank Statement Adjustment

Adjustments made to the bank statement balance to reflect transactions that have not been recorded by the bank, ensuring the balance matches the company's records.