A sound system of internal control prevents errors and misuse of funds.

• A. False
• B. True
• C. It depends
• D. Not sure

Answer: (B)

A sound internal-control system is built to stop errors and misuse of funds by creating checks and balances throughout the financial process. When controls are well designed, they require proper authorization, separation of duties, and regular oversight, so one person cannot both initiate a disbursement and approve it, and cash movements are reconciled by someone independent of the cash-handling function. This combination makes it much harder for mistakes to slip through and for funds to be diverted without detection.

Think of it as an integrated framework: clear policies for handling money, documented procedures, physical safeguards for assets, and independent reviews such as bank reconciliations and audits. Each step provides accountability and an audit trail, which not only prevents improper activity but also helps detect and correct errors promptly. Because of this structure, the aim of a sound internal-control system is to prevent errors and misuse of funds, making the statement true. It’s important to remember that no system can guarantee perfection, but effective controls greatly reduce risk and improve financial integrity.