Question

Compensating controls are described as ________.

		A. controls that deal with monetary compensation for employees and contractors
		B. controls that compensate for another control’s potential ineffectiveness
		C. controls that are determined to be redundant after analysis
		D. controls that have been determined by the auditor to be effective

Answer 1

The correct answer is option B.

Compensating controls are established to compensate for another control's potential ineffectiveness. They are also called Alternative controls. They are put over and above few existing controls in order to mitigate the potential ineffectiveness of the existing controls.

Examples of compensating controls in Internal controls of an organization

1. For example, if an organization doesn't have enough manpower for segregation of duties, then it should establish controls that compensate for the potential risk associated with it like Maintenance of logs and audit trails.