A Company May Be Limited in Its Internal Control Procedures

question 74

Multiple Choice

A company may be limited in its internal control procedures because the cost of hiring enough people to implement the procedures:

• A) outweighs the benefits of the system.
• B) has nothing to do with the effectiveness of the internal control system.
• C) can prevent collusion.
• D) can limit employee distractions.
• E) can make employees scared.

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Definitions:

Profitability

A measure of the efficiency of a company in generating profit, calculated as net income divided by revenue, indicating financial health and operational effectiveness.

Liquidity

The ease with which an asset, or security, can be converted into ready cash without affecting its market price.

Expenses Incurred

Costs that have been realized during the course of a business operation or activity.

Net Income

The amount of money remaining after all operating expenses, taxes, and interest have been deducted from total revenue.