ACCA Applied Knowledge · Business and Technology · Internal controls
An audit committee is reviewing the internal control system. Which of the following is the most appropriate route for the internal audit head to report significant control weaknesses, to preserve independence?
The head of internal audit should report significant weaknesses directly to the audit committee, which consists of non-executive directors, while keeping a working link to senior management. Reporting only to the finance director or to the audited department would allow findings to be filtered and would weaken independence.
- ADirectly to the audit committee, with a day-to-day link to the finance directorCorrect
- BOnly to the finance director, who decides what the board should be told
- CTo the manager of the department being reviewed, so that errors can be corrected before anyone else sees them
Explanation
Independence is best protected when internal audit has direct access to the audit committee, which is made up of non-executive directors. Reporting only to the finance director, or to the area being reviewed, allows management to filter findings. A day-to-day administrative link to executives is acceptable.
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