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ACCA Applied Knowledge · Business and Technology · Internal controls

Which of the following best describes the main purpose of an internal audit function reviewing a company's internal controls?

Internal audit exists to provide independent assurance to management and those charged with governance on whether internal controls are working effectively. It does not give the statutory audit opinion, which belongs to external auditors, and it should not operate controls itself, since that would damage its independence.

  1. ATo give independent assurance to management and those charged with governance on whether controls are operating effectivelyCorrect
  2. BTo express an opinion on whether the financial statements give a true and fair view for shareholders
  3. CTo design and install all new controls and then take responsibility for operating them day to day

Explanation

Internal audit evaluates and reports on the effectiveness of controls, giving independent assurance to management and the board or audit committee. The opinion on the financial statements is the role of the external auditor. Operating controls is a management responsibility, and internal audit would lose its independence if it did so.

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