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:

Subsidize

The act of providing financial assistance to individuals, businesses, or industries to support or promote economic activities.

Basic Research

Fundamental scientific research aimed at increasing understanding and knowledge, without specific immediate commercial applications.

Free-Rider Problem

A situation in which individuals consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production, because they are not charged for their usage.

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be used by everyone and one person's use does not reduce availability to others.