The concept of reasonable assurance suggests that
A)the cost of an internal control should be less than the benefit it provides
B)a well-designed system of internal controls will detect all fraudulent activity
C)the objectives achieved by an internal control system vary depending on the data processing method
D)the effectiveness of internal controls is a function of the industry environment

Question

Quizplus · Accepted Answer

The concept of reasonable assurance suggests that the cost of an internal control should be less than the benefit it provides. In other words, the level of assurance provided by internal controls should be reasonable in relation to the cost of implementing them. It is not possible to detect all fraudulent activity with internal controls, and the objectives achieved by an internal control system should be consistent regardless of the data processing method. The industry environment may affect the design and implementation of internal controls, but it does not determine their effectiveness.

The Concept of Reasonable Assurance Suggests That