Question

Which of the following statements concerning internal controls is true? Multiple Choice Strong internal controls cannot be circumvented. A system of internal controls is designed to prevent or detect errors and fraud. Internal controls are limited to the policies and procedures used to protect the company from fraud. The control procedure, separation of duties, prohibits the employment of a husband and wife or other closely related parties within the same company.

Answer 1

The True statement about internal controls is B.  A system of internal controls is designed to prevent or detect errors and fraud.

• Internal Controls are the techniques that an entity institutes to ensure the integrity of financial and accounting information, promote accountability of its employees, and prevent fraudulent activities.

• Strong internal controls can still be circumvented.  Internal controls are not limited to company policies and procedures against fraud. The employment of a husband and wife or close relations in the same company is not prohibited by control procedures or separation of duties.

Thus, the true statement about internal controls is B.

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