CMFO Internal Control And Auditing Practice Exam

Which statement reflects the principle that controls should be cost-effective?

More controls always improves performance The cost of a control should not exceed the benefit derived from it Costs should be accepted regardless of benefits Benefits should only be considered after audits

Correct Answer:

The cost of a control should not exceed the benefit derived from it

Explanation:

The main idea being tested is that controls should be cost-effective, meaning you weigh the cost of implementing and operating a control against the benefits it provides in reducing risk. This balance ensures resources aren’t wasted on controls that don’t provide enough protection. The best statement expresses this direct trade-off: the cost of a control should not exceed the benefit derived from it. When the cost outweighs the benefit, the control isn’t cost-effective and you’d seek a lighter or different approach. In contrast, simply adding more controls isn’t automatically better, costs shouldn’t be accepted regardless of benefits, and benefits should be considered during design, not only after audits.

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