"Internal control can help an entity in achieving its objectives but it is not a panacea." Discuss.

In a business entity the internal control should be adequate to cover all the key and sensitive areas of the organization. No one person should be allowed to complete one set of transactions. The control mechanism once established should be reviewed periodically in order to assess the lacunas and to remove the same. The password sharing should be strictly prohibited and stringent action should be taken against the erring staff. The efficacy of the internal control mechanism depends when the employees accepts this philosophy in the true letter and spirit. A good and efficient Internal control system can assist in the following ways: help an entity achieve its performance and profitability targets, and prevent loss of resources. help ensure reliable financial reporting. help ensure that the enterprise complies with laws and regulations, avoiding damage to its reputation and other consequences. In sum, it can help an entity get to where it wants to go, and avoid pitfalls and surprises along the way. While internal control as such is inherently useful and help organisation in many ways yet it is not a panacea as it also its limitations such as: Internal control cannot change an inherently poor manager into a good one. Internal control cannot ensure success, or even survival in case of shifts in government policy or programs, competitors' actions or economic conditions, since these are beyond the management's control. An internal control system, no matter how well conceived and operated, can provide only reasonable— not absolute—assurance to management and the board regarding achievement of an entity's objectives. The likelihood of achievement is affected by limitations inherent in all internal control systems. Controls can be circumvented by the collusion of two or more people, and management has the ability to override the system. Another limiting factor is that the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.