Narrative 16-2 Interpublic Is the World's Third-Biggest Marketing Services Group. in 2005

question 68

Multiple Choice

Narrative 16-2
Interpublic is the world's third-biggest marketing services group. In 2005, the company informed the Securities and Exchange Commission (SEC) that it "had found accounting errors resulting from incompetence as well as falsified books and records, violations of the laws and company policies, and inappropriate customer charges" that required it to restate its earnings for every year in the decade. Interpublic is guilty of overstating both its expenses and its revenues in its earnings reports. The company blames its faulty revenue reporting on "inadequate procedures for review of customer contracts." This fraudulent activity will more than likely result in a default on the company's debt and the loss of its stock market listing.
-Refer to the Narrative 16-2.It appears that the control method Interpublic believed it should have used was one that focused on whether rules and policies were being followed.Which of the following defines this approach?

• A) bureaucratic control
• B) objective control
• C) suboptimization
• D) self-control

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Definitions:

Inventory

Inventory encompasses the goods and materials that a business holds for the ultimate goal of resale or processing.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials, labor, and overhead expenses.

Days Receivable Outstanding

Days Receivable Outstanding (DRO) is a financial metric that calculates the average number of days it takes a company to collect payment after a sale has been made.

Accounts Receivable

Funds that customers owe a company for products or services that have been provided but remain unpaid.