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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's review of internal controls within a company?

Internal audit's main purpose in this context is to evaluate whether controls are well designed and operating effectively, and to report weaknesses to management and those charged with governance. The shareholder opinion on the financial statements comes from external audit, not internal audit.

  1. ATo prepare the statutory financial statements for shareholders
  2. BTo evaluate whether controls are designed and operating effectively and report weaknesses to management and those charged with governanceCorrect
  3. CTo give an independent opinion on the truth and fairness of the financial statements to the shareholders
  4. DTo design and implement all accounting systems in the company

Explanation

Internal audit evaluates the adequacy and effectiveness of controls and reports findings and recommendations internally. The opinion on the financial statements is given by the external auditor, which is why option C is wrong. Preparing the statements and designing systems are management responsibilities.

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