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ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk

Wexmoor Energy's board reviews its risk management and internal control systems annually and reports on this to shareholders. Which statement best describes the board's responsibility under good governance codes?

The board holds ultimate responsibility for maintaining and reviewing the effectiveness of risk management and internal control systems. It can delegate detailed monitoring to management and the audit committee, but accountability to shareholders remains with the board, not internal or external auditors.

  1. AThe board is responsible for maintaining and reviewing the effectiveness of risk management and internal control systems, even if it delegates the detailed work to management and the audit committeeCorrect
  2. BOnly internal audit is responsible for the effectiveness of internal controls
  3. CShareholders are responsible for monitoring internal controls through the annual general meeting
  4. DExternal auditors are responsible for designing the company's control systems

Explanation

Governance codes place ultimate responsibility on the board, which may delegate monitoring to the audit committee and management but cannot delegate accountability. Internal audit provides assurance, external auditors report on the financial statements, and shareholders hold the board to account.

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