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ACCA Strategic Professional · Strategic Business Leader · Enabling success: performance excellence

The board of Norvale Pharma wants assurance that reported quality KPIs are reliable, because the figures are used in the integrated report and in executive pay decisions. Which governance arrangement would most directly address this?

The audit committee should commission independent internal audit review of KPI data collection and reporting. This gives objective assurance that figures used in reports and pay decisions are reliable. Executive self-verification lacks independence, and tying more pay to the KPIs would increase the manipulation risk.

  1. AAllowing the executive team to approve the KPI definitions and verify the results themselves
  2. BHaving the audit committee commission independent internal audit review of KPI data collection and reportingCorrect
  3. CReplacing all non-financial KPIs with financial measures only
  4. DLinking more of executive pay to the same KPIs to increase focus

Explanation

Independent review of KPI data processes, overseen by the audit committee, gives objective assurance over reliability. Executive self-verification lacks independence. Dropping non-financial KPIs removes information instead of assuring it. Increasing the pay link raises the incentive to manipulate and worsens the risk.

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