Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Five Components of Internal Controls

Financial Accounting

6. Internal Controls and Reporting Cash

Five Components of Internal Controls

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Multiple Choice

Which of the following statements concerning internal controls is true?

The five components of internal controls include control environment, risk assessment, control activities, information and communication, and monitoring.

Once established, internal controls do not require ongoing monitoring or evaluation.

Internal controls are designed solely to prevent fraud and have no impact on operational efficiency.

Internal controls are only necessary for large corporations and not for small businesses.

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Verified step by step guidance

Understand the concept of internal controls: Internal controls are processes and procedures implemented by an organization to ensure the reliability of financial reporting, compliance with laws and regulations, and the efficiency of operations. They are not solely designed to prevent fraud but also to improve operational efficiency.

Identify the five components of internal controls: These include the control environment, risk assessment, control activities, information and communication, and monitoring. Each component plays a critical role in ensuring the effectiveness of internal controls.

Evaluate the statement about ongoing monitoring: Internal controls require ongoing monitoring and evaluation to ensure they remain effective and adapt to changes in the business environment. This is a key principle of internal controls.

Assess the statement about fraud prevention: While internal controls help prevent fraud, they are not solely designed for this purpose. They also contribute to operational efficiency and compliance with regulations.

Consider the statement about small businesses: Internal controls are necessary for all organizations, regardless of size. Small businesses also benefit from implementing internal controls to safeguard assets and ensure accurate financial reporting.