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ACCA Strategic Professional · Strategic Business Leader · Audit and compliance

Zentra Foods plc has a board that wants assurance that its risk management processes are working, but it has no internal audit function. The audit committee chair notes that the external auditor only reports on the financial statements. Which statement best describes the main contribution an internal audit function would make in this situation?

Internal audit provides independent, objective assurance and advice on whether governance, risk management and control processes are adequate and effective. It does not prepare accounts, operate controls or give the statutory audit opinion, because those are management or external auditor responsibilities.

  1. AProviding independent, objective assurance and advice on the adequacy of governance, risk management and control processesCorrect
  2. BPreparing the annual financial statements so that the external auditor can rely on them
  3. CDesigning and operating the internal controls so that management is relieved of responsibility for them
  4. DExpressing a statutory opinion on whether the financial statements give a true and fair view

Explanation

Internal audit is an independent, objective assurance and consulting activity that evaluates and improves governance, risk management and control. Preparing accounts and operating controls are management tasks, and the statutory opinion belongs to the external auditor. Taking over control operation would also destroy independence.

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