Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Limitations of Internal Controls

Financial Accounting

6. Internal Controls and Reporting Cash

Limitations of Internal Controls

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Multiple Choice

Which of the following is an inherent limitation of any client's internal control?

Segregation of duties

Collusion among employees

Use of pre-numbered documents

Regular internal audits

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Verified step by step guidance

Understand the concept of internal control: Internal control refers to the processes and procedures implemented by a company to ensure the reliability of financial reporting, compliance with laws and regulations, and the effectiveness and efficiency of operations.

Identify inherent limitations: Inherent limitations are weaknesses or risks that cannot be completely eliminated, even with a well-designed internal control system. These limitations are often due to human factors or external circumstances.

Analyze the options provided: Evaluate each option to determine whether it represents an inherent limitation of internal control. For example, segregation of duties is a control measure, not a limitation. Pre-numbered documents and regular internal audits are also control measures designed to strengthen internal control.

Focus on collusion among employees: Collusion occurs when two or more employees work together to bypass internal controls. This is an inherent limitation because internal controls rely on individual compliance, and collusion undermines their effectiveness.

Conclude that collusion among employees is the correct answer: Collusion is a limitation that cannot be entirely prevented by internal controls, as it involves intentional cooperation to commit fraud or errors.