ACCA Applied Knowledge · Business and Technology · Consequences of ineffectiveness at work
A finance team member regularly submits inaccurate month-end accruals, and the supervisor does not review them. Over time the financial statements contain misstatements that are discovered by the external auditor. Which is the most significant organisational consequence?
The most significant consequence is loss of stakeholder confidence plus possible regulatory or legal exposure from unreliable reporting. Misstatements left unreviewed damage trust among investors and lenders. Audit fees would more likely rise, the audit requirement remains, and inventory holding costs are unrelated to the error.
- APossible loss of stakeholder confidence and risk of regulatory or legal consequences from unreliable reportingCorrect
- BA guaranteed reduction in the audit fee
- CAutomatic removal of the need for an audit
- DA fall in the organisation's inventory holding costs
Explanation
Unreliable financial reporting undermines trust among investors, lenders and other stakeholders and can expose the organisation to regulatory action. An audit finding does not cut fees; if anything extra work raises them. Audits are not removed, and inventory costs are unrelated.
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