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 designed to assure the execution and recording of transactions in accordance with proper authorisations are effective against irregularities perpetrated by management.
B) The benefits expected to be derived from effective internal accounting control usually do not exceed the costs of such control.
C) Procedures whose effectiveness depends on segregation of duties can be circumvented by collusion.
D) The competence and integrity of client personnel provides an environment conducive to accounting control and provides assurance that effective control will be achieved.

Question

Quizplus · Accepted Answer

Option C best describes the inherent limitations that should be recognized by an auditor when considering the potential effectiveness of a system of internal accounting control. Procedures that depend on segregation of duties can be subverted by collusion. Options A and D are incorrect because they discuss factors that contribute to the effectiveness of internal accounting control rather than limitations. Option B is also incorrect because it suggests that the costs of effective internal accounting control usually exceed the benefits, which is not necessarily true.

Which One of the Following BEST Describes the Inherent Limitations