Limitations of internal control
Internal control has inherent limitations, including human error, collusion, management override and cost constraints. Well-designed controls provide reasonable, not absolute, assurance that objectives are achieved. The auditor considers these limitations when assessing risk and designing responses.
Worked example
Two employees collude to approve a fictitious supplier despite a control intended to separate responsibilities.
Common mistake
Do not conclude that documented controls eliminate every possibility of fraud or error.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AA | Supporting | September 2026–June 2027 |