The Concept of Reasonable Assurance Suggests That

question 107

Multiple Choice

The concept of reasonable assurance suggests that

• A)the cost of an internal control should be less than the benefit it provides
• B)a well-designed system of internal controls will detect all fraudulent activity
• C)the objectives achieved by an internal control system vary depending on the data processing method
• D)the effectiveness of internal controls is a function of the industry environment

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Definitions:

Perpetuity

A type of annuity that pays a fixed amount of money to an investor at regular intervals indefinitely.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.

Present Value

The value today of a future money sum or cash flow stream, determined by a specified return rate.

Cash Flows

The comprehensive sum of cash being moved into and away from a business, critically impacting its financial agility.