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 is a business-critical integrity constraint related to the five components of internal controls?

Increasing sales revenue through marketing

Segregation of duties to prevent fraud and errors

Maximizing shareholder dividends

Reducing production costs by outsourcing

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Verified step by step guidance

Understand the concept of business-critical integrity constraints: These are essential rules or principles that ensure the accuracy, reliability, and ethical management of business operations. They are closely tied to internal controls, which are mechanisms designed to safeguard assets, ensure financial reporting accuracy, and prevent fraud or errors.

Review the five components of internal controls: These include Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. Each component plays a role in maintaining the integrity of business operations.

Focus on the principle of segregation of duties: This is a key control activity that involves dividing responsibilities among different individuals to reduce the risk of fraud and errors. For example, separating the roles of authorization, record-keeping, and asset custody ensures no single person has control over all aspects of a financial transaction.

Evaluate the options provided in the problem: Increasing sales revenue through marketing, maximizing shareholder dividends, and reducing production costs by outsourcing are operational or strategic goals, not integrity constraints. Segregation of duties is directly related to internal controls and is a business-critical integrity constraint.

Conclude that segregation of duties is the correct answer because it aligns with the purpose of internal controls, which is to prevent fraud and errors while ensuring the reliability of financial reporting and safeguarding assets.