Principles of Accounting
12th Edition
ISBN: 9781285607047
Author: NEEDLES
Publisher: Cengage Learning
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Question
Chapter 8, Problem 1DQ
To determine
State the reason of a system of internal control not able to overcome collusion by employees.
Expert Solution & Answer
Explanation of Solution
Internal control: Internal control is a process which ensures continuous reliability of accomplishment of a company’s objectives, related to operations, financial reporting, and in conformity with laws and regulations.
Reason of a system of internal control not able to overcome collusion by employees:
- No system of internal control is without weaknesses. As long as people perform control procedures, an internal
control system will be vulnerable to human error. - Errors can arise from misunderstanding, mistakes, in judgment, carelessness, distractions, or fatigue.
- Separation of duties can be defeated through collusion by employee who secretly agrees to deceive a company.
- Established Procedure may be ineffective against employee's errors or dishonesty.
- With the change in conditions, Internal Control may become Ineffective.
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Students have asked these similar questions
Which of the following is not part of the definition of internal control?
a. Separation of duties
b. Safeguard assets
c. Encourage employees to follow company policies
d. Promote operational efficiency
Which of the following is not part of the definition of internal control?
Separation of duties
Safeguard assets
Encourage employees to follow company policies
Promote operational efficiency
why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.
Chapter 8 Solutions
Principles of Accounting
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which among the following is not representing an inherent limitation of the Internal control system a. Misunderstanding of instructions by employees b. None of these Options c. Employee conspiracy / collusion d. Limitations due to human decisions/ judgementsarrow_forwardInternal control policies and procedures have limitations not including: O Collusion. O Human fraud. O Cost-benefit principle. O Establishing responsibilities. Human error.arrow_forwarda culture of greed or ethical indifference within an organization.arrow_forward
- The management fraud is committed by a top level management employee? Give an example of those top level employee that can be classified as management fraud?arrow_forwardHow can failure in ethics affect organizational success? Is it something that can be audited?arrow_forwardWhich of the following would a fraudster perceive as a pressure?A. lack of management oversightB. everyone does itC. living beyond one’s meansD. lack of an internal audit functionarrow_forward
- Why do companies need internal control?arrow_forwardWhen it comes to control systems and materiality, why may fraud examiners' perspectives be different from those of other auditors?arrow_forwardWhy is internal controls important to prevent fraud? Why would a proper control system prevent fraud scandals?arrow_forward
- Which of the following items is an example of an inherent limitation in an intrnal control system? A. Segregation of employee duties B. Human error in decision making C. Ineffective board of directors D. Understaffed internal audit functions.arrow_forwardWhat is internal control? Why is an auditor interested in a client’s internal control?arrow_forwardWhy might fraud examiners’ attitudes about control systems and materiality differ from that ofother auditors?arrow_forward
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