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ACCA Strategic Professional · Strategic Business Leader · Reporting to stakeholders

Marlow Retail's board report states that the audit committee 'reviewed the effectiveness of internal controls' but gives no information on how the review was done, what weaknesses were found or what was done about them. A pension fund investor wants disclosures that best support accountability. Which request is most appropriate?

The investor should ask for a description of the review process, the significant issues found, the remedial actions taken and the committee's conclusion. This gives stakeholders evidence on how the board discharged its control responsibilities without exposing confidential working papers or substituting an unrelated auditor statement.

  1. ADisclose the full internal audit working papers to all shareholders
  2. BDescribe the review process, significant issues identified and the remedial action taken, with the committee's conclusionCorrect
  3. CRemove the statement, since controls are an operational matter for management only
  4. DReplace the statement with a confirmation that the external auditor found no fraud

Explanation

Meaningful accountability disclosure explains process, significant findings and remediation, allowing stakeholders to evaluate the board's conclusion. Publishing working papers is excessive and commercially sensitive. Controls are a board responsibility, and an external auditor's fraud confirmation is not equivalent to an internal control review.

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