• Management has to ensure that the benefits expected from an internal. control system
outweigh the costs. As a result certain important controls might not be put in place due
to the costs involved. c.1,. a small entity might not have the resources to employ
sufficient staff to ensure proper segregation of duties.
• Most internal controls tend to be directed towards routine transactions rather than nonroutine
transactions. This leaves gaps that can be exploited.
• Human error due to carelessness, distraction, mistakes of judgement and
misunderstanding instructions could undermine the internal control system.
• Controls could be circumvented through collusion by a member of management or an
employee with persons outside or inside the entity.
• Abuse of responsibility e.g. a member of management overriding an internal control
• The possibility that procedures maybe inadequate due to changes in conditions.
Kavungya answered the question on May 14, 2019 at 13:12
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