Multiple Choice
Which of the following is NOT a limitation of internal controls?
6. Internal Controls and Reporting Cash
Limitations of Internal Controls
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is NOT a common feature of an internal control system?
A
Physical controls over assets
B
Authorization of transactions
C
Segregation of duties
D
Collusion among employees
Verified step by step guidance1
Understand the concept of internal control systems: Internal control systems are processes and procedures implemented by an organization to safeguard assets, ensure accurate financial reporting, and promote operational efficiency.
Review the common features of internal control systems: These typically include physical controls over assets (e.g., locks, safes), authorization of transactions (e.g., requiring approval for expenditures), and segregation of duties (e.g., separating responsibilities to reduce the risk of errors or fraud).
Analyze the term 'collusion among employees': Collusion refers to a secret agreement or cooperation between employees to commit fraud or circumvent internal controls. This is not a feature of an internal control system but rather a risk that internal controls aim to mitigate.
Compare the options provided: Physical controls, authorization of transactions, and segregation of duties are all standard features of internal control systems. Collusion among employees, however, is contrary to the purpose of internal controls.
Conclude that the correct answer is 'Collusion among employees' because it is not a feature of an internal control system but a potential threat to its effectiveness.
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