Which One of the Following BEST Describes the Inherent Limitations

question 53

Multiple Choice

Which one of the following BEST describes the inherent limitations that should be recognised by an auditor when considering the potential effectiveness of a system of internal accounting control?

• A) Procedures whose effectiveness depends on segregation of duties can be circumvented by collusion.
• B) The competence and integrity of client personnel provides an environment conducive to accounting control and provides assurance that effective control will be achieved.
• C) The benefits expected to be derived from effective internal accounting control usually do not exceed the costs of such control.
• D) Procedures designed to assure the execution and recording of transactions in accordance with proper authorisations are effective against irregularities perpetrated by management.

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Definitions:

Standard Error

A statistical measure that describes the accuracy with which a sample represents a population, specifically the variability of the sampling distribution.

Sample Mean

The average of a set of numerical values taken from a subset (sample) of a larger population.

Probability

A measure of the likelihood of a particular event's occurrence, ranging from 0 (impossible) to 1 (certain).

P < 0.05

Indicates that the probability of the observed data, or more extreme, occurring by chance is less than 5%, commonly used to determine statistical significance in hypothesis testing.