Which one of the following BEST describes the inherent limitations that should be recognised by an auditor when considering the potential effectiveness of a system of internal accounting control?
A) Procedures whose effectiveness depends on segregation of duties can be circumvented by collusion.
B) The competence and integrity of client personnel provides an environment conducive to accounting control and provides assurance that effective control will be achieved.
C) The benefits expected to be derived from effective internal accounting control usually do not exceed the costs of such control.
D) Procedures designed to assure the execution and recording of transactions in accordance with proper authorisations are effective against irregularities perpetrated by management.

Question

Quizplus · Accepted Answer

Option A accurately describes the inherent limitation of internal accounting control. While internal control procedures such as segregation of duties can be effective in preventing fraudulent activities, they can still be circumvented by collusion or conspiracy among employees. The other options do not accurately describe inherent limitations of internal accounting controls.

Which One of the Following BEST Describes the Inherent Limitations