Question

Why is it important to have a very sound and well-developed internal control structure?

a) To increase workload for employees.
b) To decrease accountability.
c) To prevent fraud and errors.
d) To simplify financial reporting.

Answer 1

The importance of a strong internal control structure lies in its role to prevent fraud and errors, protect assets, and ensure accuracy in financial reporting. It is not intended to increase workload, decrease accountability, or solely to simplify financial reporting.

Step-by-step explanation:

It is important to have a very sound and well-developed internal control structure primarily to prevent fraud and errors (c). A robust internal control system is essential for establishing checks and balances within an organization, enhancing the accuracy and reliability of financial reporting, compliance with laws and regulations, and effective and efficient operations. These control mechanisms serve to protect assets, maintain records in sufficient detail to report company assets accurately, and provide a reasonable assurance that all transactions are authorized by management and recorded properly.

Option (a) To increase workload for employees, (b) To decrease accountability, and (d) To simplify financial reporting are not the primary reasons for a strong internal control structure. While simplifying financial reporting might be a byproduct of effective controls, the main aim is always to secure the organization's operations and records.