Regarding a Company's Audit Trail, Which of the Following Statements

question 48

Multiple Choice

Regarding a company's audit trail, which of the following statements is true?

• A)Because of the complexities involved in establishing an audit trail, a good audit trail normally makes it more difficult for an individual to follow the flow of a company's business transactions through the company's information system
• B)In actuality, the audit trail established within a company's information system is an unimportant element of the company's internal control system
• C)When a company's audit trail becomes more difficult to follow, this causes an increase in the risk of errors or irregularities taking place in the processing of accounting transactions and not being detected
• D)A company's policies and procedures manual should not be part of its audit trail since confidential information is included within this manual

Calculate and interpret efficiency ratios such as accounts receivable turnover and inventory turnover.

Calculate and interpret profitability ratios such as net income margin and return on equity.

Calculate and interpret solvency ratios and understand their relevance to long-term financial sustainability.

Understand the implications of paying dividends and how it affects shareholders’ wealth.

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Definitions:

Financing Statement

A document filed to give public notice of a secured party's interest in the debtor's personal property, used in the U.S. under the Uniform Commercial Code.

Certificate of Title

An official document indicating ownership of property, such as real estate or a vehicle.

Perfect

To complete or make flawless; often used in legal contexts to denote the finalization of a right or claim.

Perfection by Possession

A process in secured transactions where a creditor secures an interest in the collateral by taking physical possession of it, ensuring priority over other creditors.