Materia Blues Inc. is a company that manufactures and distributes books internationally. The company has proposed that the following comments be included in the company’s 2013 annual report to the shareholders:
“The integrity of the financial information reported by Materia Blues Inc. is the responsibility of the company’s management. Fulfilling this responsibility requires the preparation of financial statements in accordance with International Financial Reporting Standards. Materia Blues Inc. has established an excellent system of accounting and internal controls, used to gather and process financial data. Management believes that the role of the internal audit department is sufficient to ensure the high quality of the business practices and monitoring activities that are used to keep operations functioning smoothly at the company. Our public accounting firm is engaged to provide an independent opinion on our financial statements. Together with our audit committee, they provide high-quality oversight over the financial accounting processes at Material Blues Inc. The audit committee has checked the audit report prepared by the auditors and believes that it is sound. The external auditors have had free and clear access to the audit committee and to management and employees of the company during the conduct of their audit engagement.”
REQUIRED
Describe the incorrect assumptions that are implicit in the above comments. For each incorrect assumption, provide an example of more appropriate wording that might be included in the annual report to more accurately reflect healthy business practices.