What Is Wrong with the Following Report on Internal Control

question 14

Essay

What is wrong with the following report on internal control over financial reporting for AB Corporation?
The auditor believes an unqualified opinion on the effectiveness of internal control over financial reporting is warranted.
Report of Registered Public Accounting Firm
We have audited AB Corporation's internal control over financial reporting as of December 31,2011,based on criteria established in Internal Control - Integrated Framework,issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).AB's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting,testing and evaluating the design and operating effectiveness of internal control,and performing such other procedures as we considered necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.A company's internal control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that,in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use,or disposition of the company's assets that could have a material effect on the financial statements.
In our opinion,AB Corporation maintained,in all material respects,effective internal control over financial reporting as of December 31,2011,based on criteria established in Internal Control - Integrated Framework,issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We have also audited,in accordance with the standards of the Public Company Accounting Oversight Board (United States),the consolidated financial statements of AB Corporation,and our report dated February 20,2012 expressed an unqualified opinion.
Protzman & Hull
Morgan Hill,CA
February 10,2012

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Definitions:

Synaptic Vesicles

Membrane-bound sacs within a neuron that store neurotransmitters, which are released into the synaptic cleft during synaptic transmission.

Synaptic Space

The small gap between the axon terminal of one neuron and the dendrite of another neuron, through which neurotransmitters are released to transmit signals.

Synaptic Cleft

The synaptic cleft is the small gap at the junction between neurons, through which neurotransmitters carry signals from one neuron to another.

Axon Terminal

The end part of an axon that makes synaptic connections with another nerve cell or with an effector cell.