Week 5 - Limitations of Internal Controls

Question 1

What are the first three limitations of internal controls?

Answer 1

• cost versus benefit
• may only cover routine transactions - not unusual/one-off events
• may not take into account human error

Question 2

What are the next two limitations of internal controls?

Answer 2

• controls can still be susceptible to deliberate fraud and/or collusion between parties
• management may be able to over-ride controls

Question 3

What are the final two limitations of internal controls?

Answer 3

• the business environment may change, rendering controls weaker
• over reliance on IT