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ACCA Strategic Professional · Strategic Business Leader · Management and internal control systems

Alder Pharma's board receives monthly reports showing actual results against budget, but managers rarely investigate adverse variances and no one checks whether controls are still operating after the company introduced a new ERP system. Which combination of weaknesses does this best describe?

The case shows weak monitoring. Variance information is produced but not investigated, and nobody reassesses whether controls still operate after the ERP change. Ongoing and separate evaluation of controls is therefore lacking, while segregation, physical safeguards and ethics are not shown to be problems.

  1. AWeak monitoring of controls and ineffective response to management informationCorrect
  2. BWeak risk assessment and over-reliance on external audit
  3. CPoor segregation of duties and inadequate physical safeguards
  4. DInadequate ethical code and weak whistleblowing procedures

Explanation

Variances are reported but not acted upon, and no one evaluates whether controls still work after a system change. Both are monitoring failures: ongoing and separate evaluations are missing. The case gives no evidence of the duty, physical, or ethics issues in the other options.

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