Multiple Choice
Which of the following is NOT one of the five components of internal control as defined by the COSO framework?
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6. Internal Controls and Reporting Cash
Five Components of Internal Controls
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All of the following are examples of internal control procedures except:
A
Segregation of duties
B
Maximizing net income
C
Physical controls over assets
D
Mandatory employee vacations
Verified step by step guidance1
Understand the concept of internal control procedures: Internal control procedures are policies and practices implemented by a company to safeguard assets, ensure accurate financial reporting, and promote operational efficiency.
Review the examples provided in the question: Segregation of duties, physical controls over assets, and mandatory employee vacations are all examples of internal control procedures. These are designed to prevent fraud, errors, and inefficiencies.
Analyze the option 'Maximizing net income': Maximizing net income is a financial goal, not an internal control procedure. It focuses on profitability rather than safeguarding assets or ensuring accurate reporting.
Compare the options: Segregation of duties, physical controls over assets, and mandatory employee vacations are all internal control procedures, while maximizing net income does not fit the definition.
Conclude that the correct answer is 'Maximizing net income' because it is not an example of an internal control procedure.
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