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 NOT a limitation of internal control policies and procedures?

Collusion among employees can circumvent controls

Internal controls can be overridden by management

Internal controls guarantee the accuracy of financial statements

Human error may lead to control failures

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Verified step by step guidance

Step 1: Understand the concept of internal controls. Internal controls are processes and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Step 2: Review the limitations of internal controls. Common limitations include human error, collusion among employees, and the possibility of management overriding controls. These limitations highlight that internal controls are not foolproof.

Step 3: Analyze the statement 'Internal controls guarantee the accuracy of financial statements.' This is incorrect because internal controls aim to reduce risks and errors but cannot guarantee absolute accuracy due to the inherent limitations mentioned earlier.

Step 4: Compare the given options to identify which one is NOT a limitation of internal controls. The correct answer is the statement that internal controls guarantee the accuracy of financial statements, as this is not true.

Step 5: Conclude that internal controls are designed to mitigate risks but cannot eliminate them entirely due to factors like human error, collusion, and management override.