ACCA Applied Knowledge · Business and Technology · Internal controls
Which of the following best describes the primary purpose of an internal control system in an organisation?
An internal control system exists to give reasonable assurance that objectives are met, including reliable financial reporting, compliance with laws and safeguarding of assets. It cannot give absolute assurance or guarantee that fraud or error never occurs, because controls have inherent limitations.
- ATo provide reasonable assurance that objectives such as reliable reporting, compliance and safeguarding of assets are achievedCorrect
- BTo guarantee that fraud and error will never occur
- CTo replace the need for an external audit
- DTo ensure that the company maximises its profit each year
Explanation
Internal controls give reasonable, not absolute, assurance that operations are effective, reporting is reliable and laws are complied with. Option B is wrong because inherent limitations mean controls cannot guarantee that fraud never occurs.
Did you get it right without looking?
One question tells you little. A timed set on Internal controls shows your real accuracy, how long you take and where you lose marks.
More Internal controls questions
- Which of the following best describes the control environment of an organisation?
- In a small retailer, the same employee orders inventory, receives the goods into the warehouse and approves the supplier invoice for payment…
- A retailer requires that the employee who orders goods is different from the employee who receives them and the employee who authorises paym…
- Dorian plc's board is deciding whether to outsource its internal audit function to a firm of accountants rather than keep it in-house. Which…
- An audit committee is reviewing the internal control system. Which of the following is the most appropriate route for the internal audit hea…
- A company requires staff to enter a username and a password before they can open the payroll application. Which type of IT control is this?