AUD question: inherent limitation vs actual factor increases/decreases ctrl risk

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  • #1612371
    nalratoss
    Participant

    I’m confused between inherent limitation and actual factor that increases/decreases control risk.

    For example. in a SIM of Gleim. I was asked to choose answer in the right hand column that best describes item in the left hand column. I have:

    Collusion
    Management override

    and the options:
    A condition that increases control risk
    A condition that decreases control risk
    A form of documentation for internal control
    A COSO component of internal control
    An inherent limitation of internal control

    I thought collusion is a condition that increases control risk; Management override increases control risk. Turns out they are both inherent limitations of control risk.

    How to differentiate between “inherent limitations” and actual factors?

    FAR-80

    AUD-77

    REG-75

    BEC-82

     

    I'm done done!

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  • #1612508
    ThomasHallberg
    Participant

    Collusion and management override are always a risk no matter how effective the controls are in place. It is inherent, always. A company could have the greatest controls ever and a manager could override it and all the sudden it doesn't detect a misstatement. A company could have the greatest controls ever and two employees could collude and the control will fail to detect a misstatement. Therefore it has no effect on control risk.

    AUD - 81
    BEC - 77
    FAR - 76
    REG - 75
    How does Santa's accountant value his sleigh? Net Present Value

    Good luck favors the prepared

    KPMG Audit

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