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:

Coupon Bond

A type of bond that offers interest payments through coupons attached to the bond, redeemable by the holder at certain times.

Zero-coupon Bond

A debt security that doesn't pay interest but is traded at a deep discount, offering profits at maturity.

Bond Prices

The monetary amount at which a bond is traded, influenced by interest rates, credit ratings, and the bond's maturity.

Yield-to-maturity

The total return anticipated on a bond if the bond is held until it matures, accounting for interest payments and the difference between the purchase price and the par value.