What risk does "management override" pose to internal controls?

Management override poses a significant threat to the integrity of internal controls because it involves individuals in positions of authority bypassing established procedures and checks that are designed to prevent errors and fraud. When management, having the ability to influence or directly alter processes, chooses to disregard these controls, it can lead to manipulation of financial data or operational processes. This undermines the effectiveness of internal controls, as the foundation of those controls relies on compliance and adherence to prescribed policies.

The potential for fraudulent activities increases because management may have access to sensitive information and the authority to make changes without oversight. This situation creates a risk that financial statements may be misstated or that assets may be misappropriated, ultimately compromising the organization’s accountability and reliability in its reporting processes. Thus, management override is considered a serious concern in the realm of internal control systems.