Page 157 - SBL Integrated Workbook STUDENT 2018

Management internal control systems and reporting

1.3 Benefits of internal control systems

 Effectiveness and efficiency of operations.

 Reliability of financial reporting.

 Compliance with applicable laws and regulations.

Note: These may further give rise to improved investor confidence.

1.4 Limitations of internal control systems

Note: The UK Turnbull report (in paragraph 22) gives examples of causes of
failure but this list is not exhaustive.

 Poor judgement in decision-making.

 Human error can cause failures

 Control processes being deliberately circumvented by employees and others

 Management overriding controls

 Unforeseeable circumstances

Illustrations and further practice

Read Illustration 1 and 2.

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