Which group is primarily responsible for monitoring the integrity of the financial statements?

Which group is primarily responsible for monitoring the integrity of the financial statements?

• A. The board of directors.
• B. The audit committee.
• C. The external auditors.
• D. The internal auditors.

Answer: (B)

Monitoring the integrity of financial statements is a governance function carried out by the audit committee. This committee, a subset of the board, has a formal mandate to oversee the financial reporting process, including reviewing significant accounting policies and judgments, estimates, and disclosures, and ensuring controls are in place to produce reliable financial information. It also supervises the relationship with external auditors—ensuring their independence, approving audit plans, and reviewing audit findings and management’s remediation actions. This independent, focused oversight is what makes the audit committee best suited to monitor the integrity of the financial statements on behalf of the board and shareholders. The board as a whole provides oversight, but the explicit, dedicated monitoring role rests with the audit committee. External auditors offer assurance on the statements, and internal auditors support control and risk assessments, but neither is primarily responsible for monitoring the statements’ integrity.

Monitoring the integrity of financial statements is a governance function carried out by the audit committee. This committee, a subset of the board, has a formal mandate to oversee the financial reporting process, including reviewing significant accounting policies and judgments, estimates, and disclosures, and ensuring controls are in place to produce reliable financial information. It also supervises the relationship with external auditors—ensuring their independence, approving audit plans, and reviewing audit findings and management’s remediation actions. This independent, focused oversight is what makes the audit committee best suited to monitor the integrity of the financial statements on behalf of the board and shareholders. The board as a whole provides oversight, but the explicit, dedicated monitoring role rests with the audit committee. External auditors offer assurance on the statements, and internal auditors support control and risk assessments, but neither is primarily responsible for monitoring the statements’ integrity.