Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 7: Q7RQ (page 411)

What are some limitations of internal controls?

Short Answer

Expert verified

There are four limitations of the internal controls.

Step by step solution

01

Definition of internal controls

Internal controls are the control that helps in the proper management of the company.

02

Limitations if internal controls

1. Not Provide Assurance:

The first limitation of the internal controls is that it does not provide you assurance. Internal controls only provide effective controls. Hence, internal control is not the assurance that the problem is solved.

2. Human Error:

Internal controls are directly affected by human errors. If humans make some errors, then the complete process goes in vain.

3. Collision of Employees:

As you know, internal controls include the separation of duties that can cause conflict between employees.


4. Increase cost:

The following limitation of internal control increases the cost of the company.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Applying internal control over cash receipts by mail. Review the internal controls over cash receipts by mail presented in the chapter. Exactly what is accomplished by the final step in the process, performed by the controller?

What are some common controls used with a bank account?

Applying internal control over cash receipts Sandra Kristof sells furniture for McKinney Furniture Company. Kristof has financial problems and takes $650 that she received from a customer. She rang up the sale through the cash register. What will alert Megan McKinney, the controller, that something is wrong?

: Identifying timing differences related to a bank reconciliation

For each timing difference listed, identify whether the difference would be reported on

the book side of the reconciliation or the bank side. In addition,

identify whether the difference would be an addition or subtraction.

a. Deposit in transit

b. Bank collection

c. Debit memorandum from bank

d. EFT cash receipt

e. Outstanding checks

f. \(1,000 deposit erroneously recorded

by the bank as \)100

g. Service charges

h. Interest revenue

i. \(2,500 cash payment for rent

expense erroneously recorded by

the business as \)250

j. Credit memorandum from bank

Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor.

Requirements

1. Identify the internal control weakness over cash payments.

2. What could the business do to correct the weakness?
See all solutions

Recommended explanations on Business Studies Textbooks

Corporate Finance

Read Explanation

Business Development

Read Explanation

Organizational Behavior

Read Explanation

Managerial Economics

Read Explanation

Managers

Read Explanation

Financial Performance

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free