Which of the Following Statements Regarding a System of Internal

question 135

Multiple Choice

Which of the following statements regarding a system of internal control is false?

• A) Effective internal control systems provide complete assurance against the occurrence of material frauds and embezzlements.
• B) Internal control systems depend largely on the competency and honesty of people.
• C) Because internal control systems have a cost, management should evaluate the cost/benefit of each control plan.
• D) The development of an internal control system is the responsibility of management.

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Definitions:

CCA Class

Refers to a category within the Capital Cost Allowance system in Canada, grouping assets with similar depreciation rates for tax purposes.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time for an investment.

Required Rate

The minimum rate of return on an investment that a manager or investor is willing to accept before making an investment decision.

Equivalent Annual Cost

The cost per year of owning and operating an asset over its entire lifespan, considering both the initial purchase price and ongoing operating expenses.