Internal control can provide only reasonable assurance of achieving an entitys control objectives
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Return to CHAPTER 20 What is the reasonable assurance that internal control provides?Internal control is a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance: That information is reliable, accurate and timely. Of compliance with applicable laws, regulations, contracts, policies and procedures.
What is the main reason for internal control policies and procedure that provide reasonable assurance?Internal controls encourage adherence to prescribed policies and procedures. Internal controls protect employees: 1) by clearly outlining tasks and responsibilities, 2) by providing checks and balances, and 3) from being accused of misappropriations, errors or irregularities.
Why do internal auditors provide reasonable assurance rather than absolute assurance?“The term 'reasonable assurance' rather than 'absolute assurance' acknowledges that limitations exist in all systems of internal control, and that uncertainties and risks may exist, which no one can confidently predict with precision. Absolute assurance is not possible.
What is meant by the concept of reasonable assurance in terms of internal control What are the inherent limitations of internal control?6-7 The concept of reasonable assurance recognizes that the cost of an entity's internal control system should not exceed the benefits that are expected to be derived from the system. Thus, an internal control system will not detect every error that might occur because it would be too costly to design such a system.
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