What does 'management override of controls' mean?

The concept of 'management override of controls' refers to the ability of management to bypass or make exceptions to established internal controls within an organization. This can occur for various reasons, such as perceived business needs or in situations involving unexpected circumstances. While internal controls are designed to prevent and detect fraud and errors, when management overrides these controls, it poses significant risks to the integrity of financial reporting and overall business operations.

By allowing exceptions to the rules, management can inadvertently facilitate fraudulent activities or create opportunities for misuse of resources, as the checks and balances intended to safeguard the organization may be undermined. It is crucial to ensure that such overrides are monitored and justified to maintain accountability and reduce the risk of fraud.

The other options do not accurately describe 'management override of controls.' Strictly following internal control procedures or enforcing stricter policies would result in adherence to controls rather than their override. Providing additional training for employees focuses on enhancing skills and knowledge but does not inherently relate to the action of bypassing controls. Hence, the most accurate interpretation of 'management override of controls' aligns with the notion of management creating exceptions to internal controls.