Multiple Choice
Which of the following is a good internal control mechanism for cash disbursements?
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6. Internal Controls and Reporting Cash
Five Components of Internal Controls
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Which of the following is NOT one of the five components of internal controls as defined by the COSO framework?
A
Information and Communication
B
Risk Assessment
C
Control Environment
D
Revenue Recognition
Verified step by step guidance1
Understand the COSO framework: The COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework outlines five components of internal control that organizations use to achieve their objectives related to operations, reporting, and compliance.
Identify the five components of internal control: These are (1) Control Environment, (2) Risk Assessment, (3) Control Activities, (4) Information and Communication, and (5) Monitoring Activities.
Analyze the options provided in the question: The options include 'Information and Communication,' 'Risk Assessment,' 'Control Environment,' and 'Revenue Recognition.'
Compare the options to the five components of the COSO framework: Note that 'Revenue Recognition' is not one of the five components of internal control as defined by the COSO framework. Instead, it is an accounting principle related to recognizing revenue in financial statements.
Conclude that the correct answer is 'Revenue Recognition,' as it does not belong to the five components of internal control under the COSO framework.
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