The Information System Component of Internal Control

question 92

Multiple Choice

The information system component of internal control:

• A) ensures that every system that processes accounting data should have the ability to capture transactions as they occur.
• B) monitors controls.
• C) offers hints of where fraud or errors could occur.
• D) ensures that the IT department has adequate control procedures in place to ensure that no one can hack into the company's database.

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Definitions:

Net Income Determination

The process of calculating a company's total earnings after subtracting all expenses, including taxes and costs, from total revenues.

Accrual Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Cash Basis

An accounting method where revenues are recognized when cash is received and expenses are recognized when paid.

Costs Expire

This concept relates to the recognition of expenses in the income statement when the underlying value or utility of the cost is consumed or no longer exists.