CS Professional · Internal and Forensic Audit · Internal Controls
Under the COSO framework, which statement about the limitations of internal control is correct?
Internal control provides reasonable, not absolute, assurance of achieving objectives. Human error, collusion, management override and cost-benefit limits mean even an effective system cannot eliminate fraud or guarantee that objectives will always be met.
- AAn effective system gives reasonable assurance, not absolute assurance, of achieving objectivesCorrect
- BAn effective system eliminates all possibility of fraud
- CCollusion among employees cannot defeat a well-designed system
- DManagement override is not a concern if the control environment is strong
Explanation
Internal control gives reasonable assurance because of limits such as human error, collusion, management override and cost-benefit considerations. It cannot eliminate fraud, and collusion or override can defeat even well-designed controls.
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