ITEM 1. FINANCIAL
STATEMENTS
The
accompanying interim financial statements have been prepared in accordance with the instructions to Form 10-Q.
Therefore, they do not include all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders’ equity in conformity with accounting principles generally
accepted in the United States of America. Except as disclosed herein, there has been no material change in the
information disclosed in the notes to the financial statements included in the Company’s Annual Report on Form 10-K for
the year ended March 31, 2019. In the opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been included, and all such adjustments are of a
normal recurring nature. Operating results for the three months ended June 30, 2019 are not necessarily indicative of
the results that can be expected for the year ending March 31, 2020.
1
PEPTIDE TECHNOLOGIES, INC.
BALANCE
SHEETS
(UNAUDITED)
|
June 30, 2019
|
|
March 31, 2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and
equivalents
|
$
|
138,098
|
|
$
|
88,546
|
|
Prepaid expenses
|
|
—
|
|
|
9,070
|
|
Total Current Assets
|
|
138,098
|
|
|
97,616
|
|
|
|
|
|
|
|
|
Website, net
of accumulated amortization of $7,993 and $9,422 as at March 31, 2019 and June 30, 2019, respectively
|
|
6,578
|
|
|
8,007
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
144,676
|
|
$
|
105,623
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
49,785
|
|
$
|
38,348
|
|
Related party
advances
|
|
130,992
|
|
|
130,990
|
|
Accrued compensation
|
|
221,192
|
|
|
221,192
|
|
Other accrued
liabilities
|
|
7,405
|
|
|
14,778
|
|
Total Current Liabilities
|
|
409,374
|
|
|
405,308
|
|
|
|
|
|
|
|
|
Notes Payable
|
|
137,256
|
|
|
70,000
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
546,630
|
|
|
475,308
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
Common stock: $0.001 par value: 675,000,000 shares authorized: 127,112,660 issued and outstanding as at March 31,
2019 and June 30, 2019
|
|
127,113
|
|
|
127,113
|
|
Additional paid-in capital
|
|
776,963
|
|
|
776,963
|
|
Accumulated
deficit
|
|
(1,306,030
|
)
|
|
(1,273,761
|
)
|
Total Stockholders’ Deficit
|
|
(401,954
|
)
|
|
(369,685
|
)
|
Total Liabilities and
Stockholders’ Deficit
|
$
|
144,676
|
|
$
|
105,623
|
|
The
accompanying notes are an integral part of these unaudited financial statements.
2
PEPTIDE TECHNOLOGIES, INC.
STATEMENTS
OF OPERATIONS
(UNAUDITED)
|
For the Three Months Ended
|
|
|
June
30,
|
|
|
2019
|
|
2018
|
|
Operating Expenses
|
|
|
|
|
|
|
General and administrative
|
$
|
16,826
|
|
$
|
18,569
|
|
Sales and marketing
|
|
14,296
|
|
|
—
|
|
Interest expense
|
|
3,127
|
|
|
—
|
|
Total Operating Expenses
|
|
34,249
|
|
|
18,569
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
(34,249
|
)
|
|
(18,569
|
)
|
|
|
|
|
|
|
|
Other Expenses
|
|
|
|
|
|
|
Foreign Currency gain (loss)
|
|
1,980
|
|
|
(4
|
)
|
Net Loss
|
$
|
(32,269
|
)
|
$
|
(18,573
|
)
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share
|
$
|
0.00
|
|
$
|
0.00
|
|
Weighted Average Number of
Common Shares Outstanding
|
|
127,112,660
|
|
|
127,112,660
|
|
The
accompanying notes are an integral part of these unaudited financial statements.
3
PEPTIDE TECHNOLOGIES, INC.
STATEMENTS
OF CASH FLOWS
(UNAUDITED)
|
For the Three Months Ended
|
|
|
June
30,
|
|
|
2019
|
|
2018
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
Net loss
|
$
|
(32,269
|
)
|
$
|
(18,573
|
)
|
Adjustments to reconcile net loss to cash flows used in
operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
1,429
|
|
|
1,330
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
4,064
|
|
|
16,333
|
|
Prepaid expenses
|
|
9,070
|
|
|
—
|
|
Net cash used for operating
activities
|
|
(17,706
|
)
|
|
(910
|
)
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities:
|
|
|
|
|
|
|
Website development
|
|
—
|
|
|
—
|
|
Net cash used for
investing activities
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities:
|
|
|
|
|
|
|
Related party advances
|
|
2
|
|
|
312
|
|
Note payable
|
|
67,256
|
|
|
—
|
|
Net cash provided by financing activities
|
|
67,258
|
|
|
312
|
|
|
|
|
|
|
|
|
Change in cash and equivalents
|
|
49,552
|
|
|
(598
|
)
|
Cash and cash equivalents,
beginning of period
|
|
88,546
|
|
|
1,728
|
|
Cash and cash equivalents, end of period
|
$
|
138,098
|
|
$
|
1,130
|
|
The
accompanying notes are an integral part of these unaudited financial statements.
4
PEPTIDE TECHNOLOGIES, INC.
STATEMENTS
OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’ Deficit
|
|
Balance at
March 31, 2018
|
|
127,112,660
|
|
$
|
127,113
|
|
$
|
713,963
|
|
$
|
(1,180,182
|
)
|
$
|
(321,106
|
)
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,573
|
)
|
|
(18,573
|
)
|
Balance at
June 30, 2018
|
|
127,112,660
|
|
|
127,113
|
|
|
731,963
|
|
|
(1,198,775
|
)
|
|
(339,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
March 31, 2019
|
|
127,112,660
|
|
|
127,113
|
|
|
731,963
|
|
|
(1,273,761
|
)
|
|
(369,685
|
)
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,269
|
)
|
|
(32,269
|
)
|
Balance at
June 30, 2019
|
|
127,112,660
|
|
$
|
127,113
|
|
$
|
776,963
|
|
$
|
(1,306,030
|
)
|
$
|
(401,954
|
)
|
The
accompanying notes are an integral part of these financial statements.
5
NOTE 1 – NATURE OF
OPERATIONS
Peptide Technologies, Inc. (the “Company” or
“Peptide”), was incorporated in the State of Nevada, United States of America, on November 18, 2005.
The Company’s business is to develop and market
skincare products. Its plan is to build a state-of-the-art online store with a direct marketing and sales funnel aimed
at targeted channels, using internet, social media, and content marketing. The Company’s marketing approach uses vetted
channels that encompass several steps to gauge performance data from marketing tests against other campaigns in
real-time with the ability to modify content delivery to targeted consumers immediately. The Company will engage a team
with proprietary algorithmic software to assist in making these marketing decisions. Management believes this will
provide the Company a distinct advantage over other companies that outsource marketing and advertising efforts to third
parties.
The skincare space is well-suited for
direct-to-consumer sales, and there are several channels that the Company will leverage to introduce its unique branding
and creative advertising assets. Creating brand visibility, along with the back-end support to process orders, is one of
the Company’s key strengths over smaller competitors in the space. In addition, the Company will create a brand that
allows visibility and awareness to be molded organically, thereby increasing the brand’s value quickly.
The Company has identified a cosmetic and skincare
manufacturer and has agreed upon product formulations, the design and sourcing of packaging, and product costs. The
Company does not intend to enter into a long-term master supply agreement with the manufacturer. Rather, orders will be
placed through individual purchase orders as needed. The Company’s activities are subject to significant risks and
uncertainties, including the need for additional capital to carry out its plan of operation and competition from
existing consumer product companies.
The majority
of manufacturing, distribution, marketing, and sales operations will be outsourced. However, strategic planning and
development will be performed internally by the Company. This includes, but is not limited to, developing our catalog of
products, developing proprietary skincare formulations, pricing our products, deciding which markets to target, deciding
which influencers to engage in marketing campaigns, developing sales channels such as our e-commerce sites, determining
which marketing initiatives to pursue, and selecting strategic partners and suppliers to advance our business plan.
NOTE 2 –
BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The Company
prepares its financial statements in accordance with accounting principles generally accepted in the United States of
America. The accompanying interim unaudited financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and
Article 8 of Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included.
Operating
results for the three months ended June 30, 2019 are not necessarily indicative of the results that may be expected for
the year ending March 31, 2020. Notes to the unaudited interim financial statements that would substantially duplicate
the disclosures contained in the audited financial statements for the year ended March 31, 2019 have been omitted. This
report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year
ended March 31, 2019 included within the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange
Commission.
NOTE 3 –
GOING CONCERN
These financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America (“U.S. GAAP”), which contemplate the continuation of the Company as a going
concern. The Company has incurred losses from operations and had an accumulated deficit of $1,306,030 as of June 30,
2019. The Company also has excess liabilities over assets of $401,954. These factors raise doubt about the Company’s
ability to continue as a going concern.
6
Management’s plans are to actively seek capital to enable the Company to add new products
and/or services to ultimately achieve profitability. However, management cannot provide assurance that they can raise
sufficient capital and whether the Company will ultimately achieve profitability, become cash flow positive, or raise
additional debt and/or equity capital. If the Company is unable to raise additional capital in the near future or meet
financing requirements, management expects that the Company will need to curtail operations, seek additional capital on
less favorable terms, and/or pursue other remedial measures.
These
financial statements do not include any adjustments related to the recoverability and classification of assets or the
amounts and classification of liabilities that might be necessary should the Company become unable to continue as a
going concern.
NOTE 4 –SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue will be recognized on a gross basis upon shipment or upon receipt of products by the
customer, depending on the agreed-upon terms, provided that: there are no uncertainties regarding customer acceptance;
persuasive evidence of an agreement exists documenting the specific terms of the transaction; the sales price is fixed
or determinable; and collectability is reasonably assured. Management will assess the business environment, the
customer’s financial condition, historical collection experience, accounts receivable aging, and customer disputes to
determine whether collectability is reasonably assured. If collectability is not considered reasonably assured at the
time of sale, the Company does not recognize revenue until collection occurs. The Company plans to begin recognizing
revenue by the second quarter of this fiscal year.
Website
Expenditures related to the planning and operation of the Company’s website are expensed as
incurred. Expenditures related to the website application and infrastructure development are capitalized and depreciated
over the website’s estimated useful life of three (3) years. Amortization for the three months ended June 30, 2019 and
2018 was $1,429 and $1,330, respectively.
Recent Accounting
Pronouncements
The Financial
Accounting Standards Board issues Accounting Standards Updates (“ASU”) to amend the authoritative literature in the
Accounting Standards Codification (“ASC”). There have been a number of ASUs to date that amend the original text of the
ASC. The Company believes those updates issued-to-date either (i) provide supplemental guidance, (ii) are technical
corrections, (iii) are not applicable to the Company, or (iv) are not expected to have a significant impact on the
Company.
NOTE 5 – RELATED PARTY TRANSACTIONS
The Company’s former Chief Financial Officer (“CFO”) advanced $2 and $312 to the Company during the
three months ended June 30, 2019 and 2018, respectively, to pay for operating expenses. The advances are due on
demand and carry no interest. The related party advances totaled $130,992 and $130,990 as of June 30, 2019 and March 31,
2019, respectively.
NOTE 6 – COMMITMENTS AND
CONTINGENCIES
The Company is
not currently involved with and does not have knowledge of any pending or threatened litigation against the Company or
any of its officers.
7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In this
Quarterly Report, “Company,” “our company,” “us,” and “our” refer to Peptide Technologies, Inc., unless the context
requires otherwise.
Forward-Looking Statements
The following
information contains certain forward-looking statements. Forward-looking statements are statements that estimate the
happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use
of forward-looking terminology, such as “may,” “could,” “expect,” “estimate,” “anticipate,” “plan,” “predict,”
“probable,” “possible,” “should,” “continue,” or similar terms, variations of those terms or the negative of those
terms. The forward-looking statements specified in the following information have been compiled by our management on the
basis of assumptions made by management and considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those
forward-looking statements.
Business of Issuer
The business of Peptide
Technologies, Inc., (the “Company” or “Peptide”), is to develop and market skincare products. The Company does business
as Eternelle Skincare Products. Peptides, and the use of collagen, are the latest innovation in skincare as science
has proven that the use of both peptides and collagen can help manage wrinkles in skin and reverse the signs
of aging. Using proprietary peptide/collagen blends, the Company is developing a number of skincare products that
demonstrate strong efficacy in providing youthful, healthy skin and significant anti-aging benefits to both women and
men.
Our skincare products will address various skincare
needs. These products include moisturizers and serums for the face and around the eyes.
1.
|
Brightening Antioxidant Serum Pigment
Correcting Formula
– I
s a formula for uneven
skin tone that addresses regulating the production of melanin. This potent hydroquinone-free formula prevents and
corrects skin discoloration caused by UV damage and daily environmental stressors, post-inflammatory hyper-pigmentation
and melasma. Uniquely created with a blend of potent skin lighteners and brighteners including Arbutin, Licorice,
Azelaic Acid, and multiple forms of Vitamin C to inhibit and regulate melanin formation to normalize and correct pigment
production while evening out skin tone and encouraging collagen synthesis.
|
2.
|
Volumizing Antioxidant
Serum Vitamin C+ Collagen Booster
-An intensive Vitamin C
antioxidant hydra-serum created to resist and restore damage from aging, sun, stress and environmental exposure. It
neutralizes free radicals in the skin and prevents the breakdown of collagen. It provides the highest clinically-tested
percentage of stable Vitamin C, Ferulic Acid, Emblica, Vitamin E and Vitamin B5 to deliver the ultimate in skin
hydration and volume while providing unmatched antioxidant support. This skin booster firms and smoothes while
stimulating collagen production resulting in beautiful youthful skin.
|
3.
|
Antioxidant Moisturizing Creme Daily
Collagen Renewal
– A
lightweight fast absorbing
moisturizer for all skin types that targets visible signs of aging that has been formulated with synergistic ingredients
to nourish, protect and deeply hydrate the skin while improving the appearance of skin tone, texture and elasticity.
This paraben-free formula improves suppleness, enhances firmness and addresses loss of elasticity. It contains the
essential antioxidants Emblica, Vitamin E and Ergothioneine to give daily protection from UV radiation while helping to
repair free radical damage and collagen breakdown in the skin to deliver dramatic and immediate
results.
|
8
4.
|
Peptide Eye Restore Serum Micro Circulation
Booster
- The first step in a targeted light-weight eye treatment that hydrates
and soothes the delicate eye area for diminishing the look of dark circles, puffiness, fatigue and fine lines and
contains proven multi-functioning peptides to effectively treat these symptoms.
|
5.
|
Peptide
Eye Repair Complex Cellular Collagen Youth Serum
- The second step
in a highly concentrated peptide-based eye complex that effectively combats the signs &
symptoms of chronological aging while deeply hydrating and nourishing the delicate eye area. Our proprietary combination
of peptides effectively works to repair cellular communication and boost the synthesis of Collagen I, III, & IV for
a visible reduction in the appearance of fine lines and wrinkles around crow’s feet.
|
Our Company has developed its proprietary
skincare formulations, and we will use internationally recognized experts in the manufacturing of specialized,
professional qual
ity products that meet the demands of day
and resort spa, medical spa, and eco spa markets.
The Company has identified a cosmetic and skincare
manufacturer and has agreed upon product formulations, the design and sourcing of packaging, and product costs. The
Company does not intend to enter into a long-term master supply agreement with the manufacturer. Rather, orders will be
placed through individual purchase orders as needed. With profound knowledge and expertise in cosmetic chemistry and
professional skincare, this manufacturer has established itself as a leader in cutting edge formulations and product
innovation in the field of skincare.
This manufacturer offers custom product formulation
and manufacturing, allowing our Company to develop proprietary blends in order to privately brand our collection.
This supplier manufactures products in accordance
with Good Manufacturing Procedures (GMP). It also follows the recommendations of the United States Food and Drug
Administration and Health Canada and also adheres to the Quality Assurance Guidelines of the Cosmetic, Toiletry, and
Fragrance Association. These guidelines enable us to guarantee the consistency and quality of our products from batch to
batch. The manufacturer performs toxicity, microbiological, temperature, and stability tests on all formulations. They
do not test on animals, and they select all botanicals for freshness, purity of source, quality, and potency. Every
product will be researched and tested by the supplier’s manufacturing team before it is approved for sale.
We expect to
launch our products and begin recognizing revenue by the second quarter of this fiscal year.
Financial Results and Trends
Results of Operations for the Three Months Ended June 30, 2019 and 2018
At present, the Company has no revenue. Net loss increased from $18,573 for the three months ended
June 30, 2018 to $33,357 for the three months ended June 30, 2019 due to higher interest and sales and marketing
expenses.
to $32,269 for the three months ended June 30, 2019 due to higher interest and
sales and marketing expenses.
Liquidity
and Capital Resources
The Company
requires significant cash to launch its business and reduce its payables. The Company’s primary sources of liquidity and
capital resources have been notes payable, which are not sufficient prospectively. These factors raise substantial
doubt about the Company’s ability to continue as a going concern. We are actively seeking to raise additional debt
and/or equity capital to add new products and/or services to commence material operations. If the Company is unable to
raise additional capital in the near future or meet financing requirements, the Company may need to curtail or alter its
plan of operation.
9
Cash Flow
The following
table summarizes, for the periods indicated, selected items in our condensed Statements of Cash Flows:
|
Three Months
Ended
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
Net cash (used in) provided by:
|
|
|
|
|
|
|
Operating activities
|
$
|
(17,706
|
)
|
$
|
(910
|
)
|
Investing activities
|
$
|
—
|
|
$
|
—
|
|
Financing activities
|
$
|
67,258
|
|
$
|
312
|
|
Operating
Activities
Cash used in
operating activities was $17,706 and $910 for the three months ended June 30, 2019 and 2018, respectively. The increase
in cash used in operating activities was primarily due to an increase in interest and in sales and marketing
expenses.
Investing
Activities
Cash used in
investing activities was $0 for the three months ended June 30, 2019 and 2018,
Financing
Activities
Cash provided
by financing activities was $67,258 and $312 for the three months ended June 30, 2019 and 2018, respectively. The
increase in cash provided by financing activities was primarily due a note payable.
Off-Balance
Sheet Arrangements
None.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and
documents that we file from time to time with the SEC. In particular, please read our Registration Statement on Form
10-12G, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K that we file from
time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room
at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference
Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its
website
http://www.sec.gov.
ITEM
4. CONTROLS AND PROCEDURES
This report
includes the certification of our Chief Executive Officer required by Rule 13a-14 of the Securities Exchange Act of 1934
(the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control
evaluations revered to in those certifications.
10
Evaluation
of Disclosure Controls and Procedures
We maintain
disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms and that such information is
accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures
were designed to provide reasonable assurance that the controls and procedures would meet their objectives.
As required by
SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer need to carry out an evaluation of the
effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered
by this report. Based on the foregoing, our Chief Executive Officer concluded that our disclosure controls and
procedures were effective as of June 30, 2019.
Management’s Report on Internal Control over Financial Reporting
Our Chief
Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining adequate internal
control over financial reporting and for the assessment of the effectiveness of our internal control over financial
reporting. Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d(f) under the Exchange Act)
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in accordance with U.S. GAAP. Internal control over
financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of assets, (b) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
GAAP, (c) provide reasonable assurance that receipts and expenditures are being made only in accordance with appropriate
authorization of management and the Board of Directors, and (d) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the
financial statements.
Internal controls for
Peptide Technologies Inc. were presented and accepted by the Board as of February 23, 2019. In connection with the
preparation of this Annual Report on Form 10-K for the year ended March 31, 2019, our Chief Executive Officer and Chief
Financial Officer have not yet concluded that our internal controls and procedures over financial reporting were
effective as of June 30, 2019.
Inherent Limitations on Internal Controls
It should be noted that any system of controls, however well designed and operated, can provide only
reasonable and not absolute assurance that the objectives of the control system are met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of certain events. Limitations inherent in
any control system include the following:
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Judgments in decision-making can be faulty,
and control and process breakdowns can occur because of simple errors or mistakes;
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Controls can be circumvented by
individuals, acting alone or in collusion with others, or by management override;
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The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions;
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Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance with associated policies or
procedures; and
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The design of a control system must reflect
the fact that resources are constrained, and the benefits of controls must be considered relative to their
costs.
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Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected.
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