Which limitation of internal controls involves employees overriding controls by management?

• A. Human error
• B. Collusion
• C. Management override
• D. System failure

Answer: (C)

Management override of internal controls is a limitation because those in charge have the authority to bypass or override the established controls. Even the strongest control system depends on management acting within policy, and when they choose to override, the controls can be circumvented, potentially hiding fraud or errors. This happens, for example, when management approves transactions outside the normal procedures, alters accounting records, or makes year-end adjustments that defeat the intended checks and balances. Auditors look for signs of overrides—unusual or retrospective journal entries, large adjusting entries near year-end, or approvals coming from high-privilege users—and assess governance oversight to mitigate the risk. The other options describe different risks (unintended mistakes, collusion, or system failures) that don’t capture the specific ability of management to override controls.