The concept of reasonable assurance applies to internal control, but Maria Salzo, the chief compliance officer of the ABC Company, says that she does not care about reasonable assurance. She wants absolute compliance in all matters relating to the financial statements. Here’s what she said: “As long as I’m working here, we will have a perfectly tight system that ensures absolutely no fraud in our financial statements.” Tom Cheepez, the controller, disagreed with Maria Salzo and argued that anything more than reasonable assurance is both financially and practically impossible.
Do you agree with Tom Cheepez or Maria Salzo? Explain. Is absolutely preventing financial statement fraud an unrealistic goal? Could such a goal be even partially obtainable if the internal auditor reports to the CEO?