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CMA Intermediate · Business Laws and Ethics · Internal Financial Control for Financial Reporting

In the directors' responsibility statement of a listed company, what must the directors state about internal financial controls?

Directors of a listed company must state that they laid down internal financial controls and that these controls are adequate and operating effectively. The responsibility for designing and maintaining the controls rests with the Board, not with the auditor.

  1. AThat the auditor has designed the controls on the board's behalf
  2. BThat they laid down internal financial controls to be followed by the company and that such controls are adequate and operating effectivelyCorrect
  3. CThat internal financial controls are required only for the cash book
  4. DThat the controls have been approved by the Registrar of Companies

Explanation

The Board owns the internal financial control framework. For a listed company, the directors' responsibility statement says that they have laid down IFC to be followed and that these controls are adequate and operating effectively. The auditor only reports on the controls and does not design them.

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