CHAPTER 2
THEORETICAL FOUNDATION
difficult
and
expensive
to
achieve.
In
addition,
IC
systems have
inherent
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limitations such as their vulnerability towards simple errors and mistakes, faulty
judgments and decision-making, management override, or employees’
conspiracy.
According to Romney and Steinbart (2006, p. 192), the C performs three
IC performs three
important different types of controlsfunctions:
DPreventive Controls,
which
deter
problems
before
they
arise.
Examples
are
proper segregation of employee duties and effective control on physical access to
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assets, facilities, and information.
DDetective Controls
are
needed
to
discover
problems
as
soon
as
they
arise.
Examples
include
duplicate
checking
of
calculations
and
preparing
bank
reconciliations and monthly trial balances.
DCorrective
Controls remedy
control problems that have been discovered.
Examples are maintaining backup copies of transaction files and master files and
sticking to procedures for correcting data entry errors.
The IC consists of the following components:
DThe control environment.
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DThe entity’s risk assessment process.
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