The Concept of Reasonable Assurance Suggests That

question 107

Multiple Choice

The concept of reasonable assurance suggests that

• A)the cost of an internal control should be less than the benefit it provides
• B)a well-designed system of internal controls will detect all fraudulent activity
• C)the objectives achieved by an internal control system vary depending on the data processing method
• D)the effectiveness of internal controls is a function of the industry environment

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Definitions:

Variable Costs

Costs that change in proportion to the level of goods or services produced or sold.

Minimize Losses

Strategies or actions taken by individuals or firms to reduce the magnitude of financial or operational shortfalls.

Mortgage Payment

A regular payment made to a lender by a borrower, typically to pay back a home loan.

Monthly Rent

The periodic payment made by a tenant to a landlord for the use of a property or space.