The following comments are relevant to the recent management observations on the occurrences of frauds and errors. Every internal control system has some limitations.
1. A system of internal control only provides reasonable assurance that the controls are sound and not absolute assurance.
2. Human errors can override a system of internal controls, including collusion among employees.
3. For an internal control system to be effective, management should set the tone. Management should follow through with its instituted system of controls unless it makes convincing business sense to override some control.
4. Every internal control system should consider the implementation costs vis-à-vis the benefits. The employees must be involved in all aspects of internal control, just as I insisted earlier.
5. Lastly, management must understand that no system is error-proof. And every system evolves, just as fraud incidences are. Therefore, management should always be on the lookout for unforeseen circumstances.
Thus, management should ensure that its policies and practices do not compromise internal controls.
Learn more about the limitations of internal controls here: brainly.com/question/13407997
