The Preventive Controls Within a Company's Internal Control System

question 11

Multiple Choice

The preventive controls within a company's internal control system:

• A)Form the foundation for all of a company's other internal control components
• B)Focus on management's philosophy and operating style
• C)Ignore the risk factor associated with a company's control procedures
• D)Are controls put by the management to prevent problems from occurring

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Definitions:

Operating Expenses

Expenses incurred from a company's primary business activities, excluding cost of goods sold, such as rent, salaries, and utility bills.

Gross Profit

The difference between revenue and the cost of goods sold, before deducting overhead, payroll, taxation, and interest.

Cost of Goods Sold

Cost of goods sold is the direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Gross Profit Rate

The ratio of gross profit to net sales, expressed as a percentage, indicating the efficiency of a company in managing its direct costs.