Why Is Internal Control So Important

question 58

Multiple Choice

Why is internal control so important?

• A) Internal control is encouraged by several regulatory organizations, and it is required by law for publicly traded companies in an enactment in 1978 by the Cohen Commission.
• B) Internal control is essential in lowering costs due to errors and irregularities in an organization by using risk assessment and risk management techniques.
• C) Internal control enables management to maintain control over all its activities and it provides a measure of protection against erroneous or fraudulent financial reporting.
• D) The U.S. Congress has enacted legislation requiring management of publicly-traded companies to report on the effectiveness of their internal control.

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Definitions:

Government Budget

The financial plan of a government for a defined period, usually a year, detailing its projected revenues and expenditures.

Investment Tax Credit

A tax incentive that allows businesses to deduct a certain percentage of their investment in certain assets from their tax liability.

Deficit to Surplus

The process of turning a budget deficit into a surplus by increasing revenues, decreasing expenditures, or a combination of both.

Tax Laws

The legal rules and regulations governing how individuals and entities are taxed by governmental authorities.