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 is FALSE with regards to the five components of internal controls?

Information and communication only pertain to external reporting and are not relevant to internal processes.

Risk assessment involves identifying and analyzing relevant risks to achieving the entity’s objectives.

Control environment refers to the overall attitude, awareness, and actions of management regarding the internal control system.

Monitoring involves ongoing or separate evaluations to ensure internal controls are operating effectively.

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Verified step by step guidance

Step 1: Understand the five components of internal controls. These are: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. Each component plays a distinct role in ensuring the effectiveness of internal controls.

Step 2: Analyze the statement about 'Information and Communication.' This component pertains to both internal and external reporting. It ensures that relevant information flows within the organization and to external parties as needed. The statement claiming it only pertains to external reporting is incorrect.

Step 3: Review the statement about 'Risk Assessment.' This component involves identifying and analyzing risks that could prevent the entity from achieving its objectives. The statement provided is accurate and aligns with the definition of risk assessment.

Step 4: Examine the statement about 'Control Environment.' This component reflects the overall attitude, awareness, and actions of management regarding the internal control system. The statement provided is correct and matches the definition of control environment.

Step 5: Evaluate the statement about 'Monitoring.' Monitoring involves ongoing or separate evaluations to ensure that internal controls are functioning effectively. The statement provided is accurate and aligns with the definition of monitoring.