Which of the Following Is a Correct Statement About Internal

question 109

Multiple Choice

Which of the following is a correct statement about internal controls?

• A)The internal control function in a company is a process designed by management and others charged with governance to provide reasonable assurance that the financial statements are prepared in accordance with the COSO financial reporting framework.
• B)Management develops internal controls to prevent misstatements in the financial statements.
• C)The auditor reviews the internal controls developed by management to assess whether the internal controls are effective in preventing misstatements.
• D)The auditing standards define internal controls over financial statements as processes designed by management and others charged with governance to provide reasonable assurance that company responsibilities are met.

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Definitions:

Return on Common Shareholders' Equity Ratio

A financial metric that measures a company's profitability by showing how much profit it generates with the money shareholders have invested, specifically focusing on common stockholders.

Profit Margin

A financial metric that measures the amount of profit a company earns per dollar of revenue, indicating the efficiency of the company in converting sales into profits.

Inventory Turnover Ratio

A measure of how often a company sells and replaces its inventory over a period, indicating the efficiency of inventory management.

Profit Margin

A financial metric used to evaluate a company's financial health by dividing net income by net sales, showing the percentage of revenue that exceeds the cost of goods sold.