
Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Chapter 8, Problem 1DQ
To determine
State the reason of a system of internal control not able to overcome collusion by employees.
Expert Solution & Answer

Explanation of Solution
Internal control: Internal control is a process which ensures continuous reliability of accomplishment of a company’s objectives, related to operations, financial reporting, and in conformity with laws and regulations.
Reason of a system of internal control not able to overcome collusion by employees:
- No system of internal control is without weaknesses. As long as people perform control procedures, an internal
control system will be vulnerable to human error. - Errors can arise from misunderstanding, mistakes, in judgment, carelessness, distractions, or fatigue.
- Separation of duties can be defeated through collusion by employee who secretly agrees to deceive a company.
- Established Procedure may be ineffective against employee's errors or dishonesty.
- With the change in conditions, Internal Control may become Ineffective.
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An error exists in a set of financial statements. The error is not pervasive, but material. The CPA can issue what type of report?
Qualified Disclaimer Adversea. No No Yesb. Yes Yes Noc. No Yes Yesd. Yes No Yese. Yes No No
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Principles of Accounting
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