Question
Which of the following statements is not correct regarding internal control?
A well-designed internal control environment ensures the achievement of an entity/s control
objectives.
An inherent limitation to internal control is the fact that controls can be circurnvented ty
management override.
A well-designed and operated internal control environment should detect collusion-perpetrated
by two people.
Internal control is a necessary business function and should be designed and operated to detect
errors and fraud.
A well-designed internal control environment ensures the achievement of an entity/s control
objectives.
An inherent limitation to internal control is the fact that controls can be circurnvented ty
management override.
A well-designed and operated internal control environment should detect collusion-perpetrated
by two people.
Internal control is a necessary business function and should be designed and operated to detect
errors and fraud.
Ask by Rogers Craig. in the United States
Mar 23,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The statement “A well-designed and operated internal control environment should detect collusion perpetrated by two people” is not correct.
Solution
To determine which statement is not correct regarding internal control, let’s analyze each statement:
-
A well-designed internal control environment ensures the achievement of an entity’s control objectives.
- This statement is generally correct. A well-designed internal control system aims to help an organization achieve its objectives, including compliance, operational efficiency, and financial reporting reliability.
-
An inherent limitation to internal control is the fact that controls can be circumvented by management override.
- This statement is also correct. One of the inherent limitations of internal controls is that management has the ability to override controls, which can lead to potential misuse or fraud.
-
A well-designed and operated internal control environment should detect collusion perpetrated by two people.
- This statement is not correct. While internal controls can help prevent and detect fraud, collusion between two or more individuals can often bypass internal controls, making it difficult to detect.
-
Internal control is a necessary business function and should be designed and operated to detect errors and fraud.
- This statement is correct. Internal controls are essential for detecting and preventing errors and fraud within an organization.
Based on this analysis, the statement that is not correct is:
"A well-designed and operated internal control environment should detect collusion perpetrated by two people."
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Extra Insights
A well-designed and operated internal control environment should detect collusion-perpetrated by two people. This statement is misleading because collusion can effectively bypass controls that might be successful against a single individual acting alone. When two or more individuals collaborate to deceive, they can create situations that are not easily detected by traditional internal controls.
An inherent limitation to internal control is the fact that controls can be circumvented by management override. This essentially means that even the best-laid plans can be foiled if those in higher positions choose to bypass or manipulate the system, emphasizing the need for a strong ethical culture and independent oversight.
