What are the Limitations of Internal Controls?A system of controls does not provide absolute assurance that the control objectives of an organization will be met. Instead, there are several inherent limitations in any system that reduce the level of assurance. These inherent limitations are as follows. Show
CollusionTwo or more people who are intended by a system of control to keep watch over each other could instead collude to circumvent the system. Since this essentially eliminates a control, the probability of losses being incurred is greatly increased. Human ErrorA person involved in a control system could simply make a mistake, perhaps forgetting to use a control step. Or, the person does not understand how a control system is to be used, or does not understand the instructions associated with the system. This may be caused by the assignment of the wrong person to a task. Management OverrideSomeone on the management team who has the authority to do so could override any aspect of a control system for his personal advantage. Missing Segregation of DutiesA control system might have been designed with an insufficient segregation of duties, so that one person can interfere with its proper operation. Consequently, it must be accepted that no system of internal controls is perfect. There is always a way in which it can fail or be circumvented. According to COSO, which of the following components of the enterprise risk management addresses an entity's integrity and ethical values Which of the following items is one of the eight components of COSO's enterprise risk management framework In a large public corporation, evaluating internal control procedures should be responsibility of internal audit staff who report to the board of directors Which of the following represents an inherent limitation of internal controls? the CEO can request a check with no purchase order Which of the following is the best way to compensate for the lack of adequate segregation of duties in a small organization Allowing for greater management oversight of incompatible activities Review of the audit log is an example of which of the following types of security control Which of the following is not a component of internal control as defined by COSO Which of the following is considered an application input control? Which of the following control activities should be taken to reduce the risk of incorrect processing in a newly installed computerized accounting system Independently verify the transactions Which of the following statement is correct regarding internal control? An inherent limitation to internal control is the fact that controls can be circumvented by management override Obtaining an understanding of an internal control involves evaluating the design of the control and determining whether the control has been A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following response to the risk Each of the following types of controls is considered to be an entity-level control, except those Regarding the company's annual stockholder meeting Controls in the information technology area are classified into preventive, detective, and corrective categories. Which of the following is preventive control All of the following are examples of internal control procedures except Customer satisfaction surveys The Public Company Accounting Oversight Board (PCAOB) is not responsible for standards related to Which of the following most likely would not be considered as an inherent limitation of the effectiveness of a firm's internal control According to COSO which of the following is not a component of internal control When considering internal control, an auditor should be aware of reasonable assurance, which recognizes that The cost of an entity's internal control should not exceed the benefits expected to be derived Proper segregation of duties calls for separation of the following functions Authorization, recording, and custody An entity's ongoing monitoring activities often include Reviewing the purchasing function The overall attitude and awareness of a firm's top management and board of directors concerning the importance of internal control is often reflected in its Management philosophy and operating style would have a relatively less significant influence on a firm's control environment when Accurate management job descriptions delineate specific duties Control risk should be assessed in terms of Financial statement assertions An auditor assesses control risk because it affects the level of detection risk that the auditor may accept The framework could be used by management in its internal control assessment under requirements of SOX is the All of the above are correct The internal control provisions of SOX apply to which companies in the United States Reconciliation of cash accounts may be referred to as what type of control? Sound internal control dictates that immediately upon receiving checks from customers by mail, a responsible employee should Prepare a summary listing of checks received Tracing shipping documents to pre-numbered sales invoices provides evidence that Shipments to customers were properly invoiced Which of the following input controls is a numeric value computed to provide assurance that the original value has not been altered in construction or transmission A customer intended to order 100 units of a product A, but incorrectly ordered nonexistent product B. Which of the following controls most likely would detect this error Which of the following is an example of a validity check The computer flags any transmission for which the control field value did not match that of an existing file record Which of the following is a computer test made to ascertain whether a given characteristic belongs to the group Which of the following represents an inherent limitations of internal control?Which of the following is an inherent limitation of internal control? Collusion.
Which of the following statements is an example of an inherent limitation of internal control?b. One of the inherent limitations of accounting and internal control systems is the possibility that. the procedures may become inadequate due to changes in conditions, and compliance with procedures may deteriorate.
What are the limitations of any system of internal controls?What Are the 12 Limitations of Internal Controls?. Manual Processes/Human Error. ... . Lack of Accurate Data. ... . Too Many Controls. ... . Inconsistent Controls. ... . Insufficient Resources. ... . Siloed Approach. ... . Cannot Achieve 100% Control. ... . Collusion/Fraud.. Which of the following is an inherent limitation?Inexperienced staff is an inherent limitation. Option (c) is the correct answer.
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Which of the following represents an inherent limitation of internal controls?
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