Following is an excerpt from the 2020 annual report of BHP Holdings Ltd Management’s assessment of our internal control over financial reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting …

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, the effectiveness of BHP’s internal control over financial reporting has been evaluated based on the framework and criteria established in internal controls – Integrated Framework (2013), issued by the Committee of the Sponsoring Organizations of the Treadway Commission

(COSO). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at 30 June 2020. There were no material weaknesses in BHP’s internal controls over financial reporting identified by management as at 30 June 2020.

BHP has engaged our independent registered public accounting firm, EY, to issue an audit report on our internal control over financial reporting for inclusion in the financial statements section of the Annual Report and the Annual Report on Form 20-F as filed with the SEC.

There have been no changes in our internal control over financial reporting during FY2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. This includes COVID-19, which only had a minor impact on internal controls over financial reporting in relation to both the number and nature of controls that were impacted.

BHP, Annual Report 2020, p. 134.

1 Who is responsible for internal control?

2 Provide examples of potential limitations of internal control.

3 Why can internal controls provide only reasonable assurance that business risks will be fully mitigated?

4 Provide an example of COVID-19 effects on internal control.