Internal control can provide only reasonable, but not absolute, assurance that the objectives stated above are achieved. This is because there are some inherent limitations of internal control, such as :
- management’s consideration that a control be cost-effective;
- the fact that most controls do not tend to be directed at transactions of unusual nature;
- the potential for human error;
- the possibility of circumvention of controls through collusion with parties outside the entity or with employees of entity;
- the possibility that a person responsible for exercising control could abuse that authority, for example, a member of management overriding a control;
- the possibility that procedures may become inadequate due to changes in conditions and compliance with procedures may deteriorate;
- manipulations by management with respect to transactions or estimates and judgements required in the preparation of financial statements.