ACCA Audit and Assurance (F8) Practice Exam

What is the main focus of performance review in internal controls?

1. Market trends

2. Sales and budget comparisons

3. Staff performance assessments

4. Compliance with regulations

The correct answer is: Sales and budget comparisons

The main focus of performance review in internal controls centers around sales and budget comparisons, which serve as vital tools for evaluating the effectiveness and efficiency of an organization's operations. Performance reviews assess how actual financial results measure against planned budgets, helping to identify variances that could indicate potential issues with internal controls. By analyzing these comparisons, management can gain insights into areas where the organization is performing as expected, as well as areas needing improvement. This process enables the organization to take corrective actions, maintain appropriate levels of control, allocate resources effectively, and ultimately enhance operational performance. Monitoring sales against budgets also aids in forecasting and strategic planning, ensuring that internal control systems remain aligned with business objectives and operational goals. Other options, while relevant to an organization's overall performance, do not encapsulate the primary focus of performance review in internal controls in the same manner. For instance, market trends can inform strategic direction but are less directly tied to the effectiveness of internal control systems. Staff performance assessments primarily evaluate individual contributions without directly addressing the overall effectiveness of internal controls. Compliance with regulations is crucial for ensuring the organization adheres to laws and policies but does not reflect the specific operational focus of performance reviews on sales and budget alignment.