ACCA Audit and Assurance (F8) Practice Exam

Which component is NOT part of the Internal Control framework?

1. Control environment

2. Stakeholder engagement process

3. Information systems related to financial reporting

4. Monitoring of controls

The correct answer is: Stakeholder engagement process

The correct choice, which identifies the component that is not part of the Internal Control framework, is the stakeholder engagement process. The Internal Control framework, particularly as outlined in frameworks such as COSO, includes specific components crucial for ensuring reliable financial reporting and effective operations. The control environment refers to the organizational culture and governance structure that sets the tone for the internal control system. It encompasses the integrity, ethical values, and competence of the entity’s people, which directly influences the effectiveness of the internal control framework. Information systems related to financial reporting are integral to the internal control system as they provide the necessary data and reporting mechanisms to monitor and manage financial and operational performance. These systems ensure that financial data is accurate and timely, which is essential for decision-making and compliance. Monitoring of controls is another key component of the internal control framework. This involves ongoing evaluations of the effectiveness of the internal control system, allowing organizations to identify weaknesses, take corrective actions, and adapt to changing conditions. In contrast, while stakeholder engagement is an important process for an organization, focusing on its relationships with various parties such as customers, suppliers, and investors, it is not classified as a core component of the internal control framework. It may support the effectiveness of the internal control system but does not