Multiple Choice
Managers use an internal control system primarily to:
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6. Internal Controls and Reporting Cash
Five Components of Internal Controls
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Internal controls are primarily concerned with which of the following?
A
Ensuring the reliability of financial reporting and safeguarding assets
B
Complying only with tax regulations
C
Reducing the number of employees to cut costs
D
Maximizing company profits through aggressive sales strategies
Verified step by step guidance1
Understand the concept of internal controls: Internal controls are processes and procedures implemented by a company to ensure the accuracy and reliability of financial reporting, safeguard assets, and comply with laws and regulations.
Eliminate irrelevant options: Internal controls are not primarily concerned with reducing the number of employees to cut costs or maximizing company profits through aggressive sales strategies. These are operational or strategic goals, not the focus of internal controls.
Focus on compliance and reliability: Internal controls aim to ensure compliance with applicable laws and regulations, but their primary focus is on the reliability of financial reporting and safeguarding assets.
Compare the options: The correct answer should align with the primary purpose of internal controls, which is ensuring the reliability of financial reporting and safeguarding assets.
Select the correct answer: Based on the analysis, the correct answer is 'Ensuring the reliability of financial reporting and safeguarding assets.'
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