Question 4 of 50 View Policies Current Attempt in Progress Which of the following is not a limitation of internal control? Cost of establishing control procedures should not exceed their benefit. The size of the company. Collusion. The human element. â—»
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O The size of the company. O Collusion. O The human element. Save for Later Show more…
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What is the rationale for the internal control principle, segregation of duties? select one: a. history has shown that employees are generally dishonest and thus cannot be entrusted with performing related duties. b. the work of one employee should, without duplication of effort, provide a reliable basis for evaluating the work of another employee. c. control is most effective when only one person is responsible for a given task. d. segregation of duties causes companies to hire more employees and thus it supports the economy?
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Lew Pherson and Vera Collier are friends who are employed by different CPA firms. One day during lunch, they are discussing the importance of internal control in determining the amount of audit evidence required for an engagement. Pherson expresses the view that internal control must be evaluated carefully in all companies, regardless of their size or whether they are publicly held, in a similar manner. His CPA firm requires a standard internal control questionnaire on every audit, as well as a flowchart of every transaction area. In addition, he says the firm requires a careful evaluation of the system and a modification in the evidence accumulated based on the controls and deficiencies in the system. Collier responds by saying she believes that internal control cannot be adequate in many of the small companies she audits; therefore, she simply ignores internal control and acts under the assumption of inadequate controls. She goes on to say, "Why should I spend a lot of time obtaining an understanding of internal control and assessing control risk when I know it has all kinds of weaknesses before I start? I would rather spend the time it takes to fill out all those forms in testing whether the statements are correct." Required: Express in general terms the most important differences between the nature of the potential controls available for large and small companies.
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