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ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance

Which of the following statements about the directors' responsibility for internal control is correct?

Directors are responsible for designing, implementing and maintaining internal controls that safeguard assets and help prevent and detect fraud and error. This responsibility remains with them even when an external audit takes place, and does not depend on company size.

  1. ADirectors are responsible for designing and maintaining internal controls that help safeguard assets and prevent and detect fraudCorrect
  2. BInternal controls are the sole responsibility of the external auditor
  3. CDirectors have no responsibility for detecting fraud once an audit is performed
  4. DInternal controls are required only for companies with more than 500 employees

Explanation

The directors are responsible for establishing and maintaining internal control to safeguard assets and to prevent and detect fraud and error. An audit does not transfer this responsibility to the auditor. Control responsibility does not depend on the number of employees.

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