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ACCA Strategic Professional · Strategic Business Leader · Internal control and management reporting

Dovan Engineering's production director presents the board with a report that shows only the plants meeting target, omitting two plants with serious quality failures, saying the board 'wants good news'. Which governance or reporting concern does this MOST directly raise?

The main concern is information asymmetry. By omitting failing plants, the production director gives the board incomplete, biased information, which weakens its oversight and monitoring role. Reports to the board must be balanced and complete, and selective presentation also breaches expected standards of integrity.

  1. AInformation asymmetry that undermines the board's ability to oversee, because it receives incomplete and biased informationCorrect
  2. BExcessive use of exception reporting, which is always inappropriate
  3. CA conflict between short-term and long-term budgeting
  4. DA lack of segmentation in the cost accounting system

Explanation

Selective reporting gives the board a distorted view, creating information asymmetry between management and those charged with oversight. Exception reporting itself highlights problems rather than hiding them, so it is not the issue. The board cannot discharge its monitoring role without complete and balanced information, which also raises ethical concerns about integrity.

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