When Internal Controls Are Effective

question 1

Multiple Choice

When internal controls are effective,

• A) there will be an increased reliance on substantive tests of transactions and account balances.
• B) control risk will also be high.
• C) the organization is more likely to achieve its strategic and operating objectives.
• D) the organization is less likely to achieve its strategic and operating objectives.

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Definitions:

Common Fixed Costs

Costs that do not vary with the level of output or sales, shared among products or departments.

Investment Evaluation

The process of determining the potential returns of an investment opportunity, considering risks, costs, and benefits to make informed financial decisions.

Responsibility Centres

Divisions or departments within an organization, each managed by a supervisor who is responsible for its performance and costs.

Profit and Loss Statements

Financial documents that summarize revenues, costs, and expenses incurred during a specific period to show a company's net income or loss.