Internal Control Systems Are Subject to Limitations That Usually Arise

question 31

True/False

Internal control systems are subject to limitations that usually arise from either (1) human error or human fraud, or (2) the cost-benefit principle.

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Definitions:

Revenue

The cumulative revenue obtained from selling goods or services integral to a business's core functions.

Cost Recovery Method

A revenue recognition approach where no profit is recognized until all the costs of the goods sold have been recovered from revenues.

Merchandise Sold

The goods that have been sold by a company, typically referring to products sold rather than services rendered.

Gross Profit

The difference between the revenue generated from sales and the cost of goods sold, before accounting for operating expenses, interest, and taxes.