Internal Controls Can Prevent, Detect or Correct a Problem

question 60

Multiple Choice

Internal controls can prevent, detect or correct a problem.Which of the following groups includes controls that will fulfill all three with respect to the risk of an employee embezzling money by forging a manager's signature on a check?

• A)Separation of duties, internal audit, employee bonding
• B)Physical security of cash, pre-numbered documents, restrictive endorsements
• C)Separation of duties, pre-numbered documents, restrictive endorsements
• D)Physical security of cash, internal audit, employee bonding

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Definitions:

Financing Activities

Transactions and events that affect a company's long-term liabilities and equity, such as issuing debt or equity, repaying loans, and paying dividends.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, not relating directly to the entity's usual line of business.

Noncash Investing

Involves transactions that do not directly involve cash but affect the investing activities of a company; for example, acquiring assets through a trade or a note.

Financing Activity

Transactions related to a company’s financing efforts, including issuing debt, obtaining loans, or issuing shares of stock.