What Is the Single Most Effective Control That Avoids Allowing

question 78

Multiple Choice

What is the single most effective control that avoids allowing one person to be in a position to perpetrate and then conceal errors or inappropriate activities?

• A) The segregation of authorization of transactions, custody of related assets, and modification or creation of related data and program files (or paper- based records).
• B) The requirement that each employee take a vacation each year.
• C) The establishment of an internal auditing department.
• D) The bonding of personnel in positions that necessitate handling cash and negotiable securities.

---

Definitions:

Carrying Cost

The total cost of holding inventory, including storage, insurance, taxes, opportunity costs, and depreciation.

Fixed Costs

Costs that do not change when the quantity of output changes during a particular time period.

Break-Even Default Rate

The rate of default at which a lender breaks even on a loan, neither earning a profit nor incurring a loss.

Monthly Interest Rate

The interest rate expressed as a monthly percentage, reflecting the cost of borrowing or the earnings on savings for one month.