The path is sometimes a big security problem. It is a very common way to hack into a system using some mistakes in path settings. It is easy to make Trojan horse attacks if hacker gets root or other users to execute his versions of commands.
A common mistake in the past (?) was to keep '.' in the root's path. Malicious hacker makes program 'ls' in his home directory. If root makes
# cd ~hacker
# ls
he executes ls command of hacker's.
Indirectly, this same applies to all the programs that are executed as root. Any of the important daemon processes should never execute anything that some other user can write into. In some systems, /usr/local/bin is allowed to contain programs with less strict security screening - it is just removed from the path of the root user. However, if it is known that some daemon executes 'foo' using path '/usr/local/bin/:...', it may be possible to cheat daemon to execute '/usr/local/bin/foo' instead of '/bin/foo'. Likely anybody who can write to '/usr/local/bin' is able to break into the system.
It is very important to consider in what order the directories are in the path. If /usr/local/bin is before /bin, it is a security risk - if it is after, it is not possible to overwrite command /bin/foo with some localized modification in /usr/local/bin/foo.
In Linux it should be remembered that the path evaluation is done in the operating system call level. Everywhere where an executable file path is given you can give a short name that is searched at least from /bin and /usr/bin - likely from many other places as well.