A Good Internal Control System Does Which of the Following

question 17

Multiple Choice

A good internal control system does which of the following?

• A) Guarantees the efficiency and effectiveness of operations
• B) Reduces the risk of undetected errors
• C) Provides absolute assurance that no errors will occur
• D) Guarantees that fraud will be prevented
• E) Reduces the risk of breaking the law

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Definitions:

Restricted Fund Method

An accounting approach used for reporting where resources are segregated based on restrictions or designations imposed by donors or regulators.

Deferral Method

An accounting practice where certain revenues and expenses are deferred to future accounting periods, rather than being recognized immediately.

Encumbrance System

A financial accounting system used primarily by governments that tracks commitments made against funds before they are actually spent, ensuring that appropriations are not exceeded.

Expenditure Basis

An accounting method where expenses are recognized and recorded at the point when the obligation is incurred.