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CMA Intermediate · Corporate Accounting and Auditing · Report on Internal Financial Control over Financial Reporting

In the audit of internal financial controls over financial reporting, which of the following is a correct statement about the responsibility of management and the auditor?

Management and the board are responsible for establishing and maintaining internal financial controls, while the auditor's responsibility is to express an opinion on their adequacy and operating effectiveness. The auditor does not design the controls, as that would compromise independence.

  1. AManagement is responsible for establishing and maintaining internal financial controls, and the auditor is responsible for expressing an opinion on themCorrect
  2. BThe auditor is responsible for designing the internal financial controls of the company
  3. CManagement expresses an opinion on the controls, and the auditor implements them
  4. DThe audit committee alone is responsible for operating controls daily

Explanation

The company's board and management establish and maintain internal financial controls based on criteria such as the essential components in the Guidance Note. The auditor's responsibility is to express an opinion on their adequacy and operating effectiveness based on the audit. Designing controls would impair independence.

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