Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Who is responsible for establishing and maintaining a system of internal control?

1. The external auditors

2. The board of trustees

3. The directors

4. The finance committee

The correct answer is: The directors

The responsibility for establishing and maintaining a system of internal control lies primarily with the directors of an organization. This accountability stems from their role in overseeing the entire governance and operational framework of the entity. Directors are expected to ensure that the organization implements adequate controls to mitigate risks, safeguard assets, and maintain the integrity of financial reporting. They must assess the effectiveness of these controls periodically and make necessary adjustments to respond to changes in the operational environment or risk landscape. This proactive approach is crucial for achieving organizational objectives and fostering compliance with applicable laws and regulations. While the board of trustees and the finance committee play important oversight roles and may have specific responsibilities related to finance and governance, the ultimate accountability for the internal control system rests with the directors, who set the tone for the organization’s ethical conduct and governance practices. External auditors, on the other hand, provide an independent assessment of the effectiveness of the internal control system but do not have responsibilities for establishing or maintaining it. Their role is to evaluate and offer insights based on their assessments of the control environment established by the directors.