Internal controls are essential features of any
organization that is run efficiency.
organization that is run efficiency.
·
A
requirement that the cost of an internal control is not disproportionate to the
potential loss which may result from its absence.
A
requirement that the cost of an internal control is not disproportionate to the
potential loss which may result from its absence.
·
Internal
controls tend to be directed at routine transactions.
Internal
controls tend to be directed at routine transactions.
The one-off or unusual
transaction tends not to be the subject of internal control.
·
Potential
human error caused by stress of workload, alcohol, carelessness, distraction,
mistakes of judgments, apathy and the misunderstanding of instructions.
Potential
human error caused by stress of workload, alcohol, carelessness, distraction,
mistakes of judgments, apathy and the misunderstanding of instructions.
·
The
possibility of circumvention of controls either alone or through collusion with
parties outside or inside the entity.
The
possibility of circumvention of controls either alone or through collusion with
parties outside or inside the entity.
·
Abuse of
responsibility by senior managers resulting in management override of controls
Abuse of
responsibility by senior managers resulting in management override of controls
·
Fraud.
Fraud.
·
Changes
in environment making controls inadequate.
Changes
in environment making controls inadequate.
The IAS 315 requires that auditors must always
perform some substantive tests of material items as well as relying on internal
controls. The inherent limitations of internal controls are the reason.
perform some substantive tests of material items as well as relying on internal
controls. The inherent limitations of internal controls are the reason.