A Company's Internal Control System

question 4

Multiple Choice

A company's internal control system:

• A)Eliminates the risk of loss.
• B)Monitors and controls business activities.
• C)Eliminates human error.
• D)Eliminates the need for audits.
• E)Is not necessary in large companies.

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Definitions:

Operating Activities

These activities relate directly to the business's primary operations, such as selling goods or services, as opposed to investing or financing activities.

Cash Flows

The cumulative sum of funds moving in and out of a company, particularly impacting its ability to cover short-term obligations.

Indirect Method

A method of reporting cash flows from operating activities in the cash flow statement by starting with net income and adjusting for non-cash transactions.

Indirect Method

A technique used in cash flow analysis to adjust net income by changes in non-cash accounts to arrive at cash provided by operating activities.