© D.L. Crumbley
PCAOB states that internal controls over financial reporting includes company policies and those procedures “designed and operated to provide reasonable assurance - -a high, but not absolute, level of assurance - - about the reliability of a company’s financial reporting and its process for preparing financial statements in accordance with generally accepted accounting principles.” Also included are those policies and procedures for “the maintenance of accounting records, the authorization of receipts and disbursements, and the safeguarding of assets.”
Even the PCAOB believes that internal controls “cannot provide absolute assurance of achieving financial reporting objectives because of inherent limitations (e.g., a process that involves human diligence and compliance can be intentionally circumvented).”
Source: PCAOB Briefing Paper, Proposed Auditing Standards, October 7, 2003.