Internal control does not consist of policies and procedures that:

• A. Help ensure the reliability of financial reporting
• B. Promote operational efficiency and effectiveness
• C. Guarantee the achievement of organizational objectives with absolute certainty
• D. Encourage compliance with applicable laws and regulations

Answer: (C)

Verified step by step guidance

1. Understand the concept of internal control: Internal control refers to the policies and procedures implemented by an organization to ensure the reliability of financial reporting, promote operational efficiency, and encourage compliance with laws and regulations.
2. Recognize the limitations of internal control: While internal control is designed to help achieve organizational objectives, it cannot guarantee absolute certainty in achieving these objectives due to inherent limitations such as human error, collusion, or management override.
3. Analyze the options provided in the problem: Evaluate each statement to determine whether it aligns with the purpose and limitations of internal control. For example, ensuring reliability of financial reporting and promoting operational efficiency are valid purposes of internal control.
4. Identify the incorrect statement: The statement 'Guarantee the achievement of organizational objectives with absolute certainty' is incorrect because internal control systems cannot provide absolute assurance due to their inherent limitations.
5. Conclude the reasoning: Internal control is a system designed to reduce risks and improve processes, but it cannot eliminate all risks or guarantee outcomes with absolute certainty. This understanding helps clarify why the incorrect statement does not align with the concept of internal control.