ACCA BT · Chapter 8 · Question 6 of 11
Why can a system of internal control provide only reasonable, rather than absolute, assurance that the organisation's objectives will be achieved?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Controls can be overridden by management or circumvented by collusion between employees
Explanation
Inherent limitations of internal control include human error, collusion to circumvent segregation of duties, management override, controls designed for routine rather than unusual transactions, and cost-benefit constraints. Controls do cover financial reporting, are designed by management rather than the external auditor, and operate throughout the year.
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