Question

Which of the following statements regarding limitations on internal control is true?

options:

Companies can design a system of internal control that is foolproof.

A well-designed internal control system is a luxury that few companies can afford.

An entity's size has little effect on the degree of control that it can obtain.

Human errors can weaken an internal control system.

Answer 1

Answer

OPTION D

Explanation:

• No company can make an internal control system that is foolproof. A good internal control system gives the entity a reasonable assurance and not foolproof assurance.
• All companies can make a good internal control system irrespective of their size or nature.
• But the bigger the organization is, the more complex and detailed internal control it requires and vice versa.
• Human errors can weaken the internal control of an organization
• Clearly, the option d is correct and other options are incorrect.

In case of any doubt, please comment.