Page 37 - Patisserie Valerie Teaching Note

Internal Audit & Corporate Governance

Failure

Management

has the

responsibility
for financial

statements not
auditors.

However,

management at Patisserie Holdings appear not to have

picked up any red flags that investigation of the accounts

should have readily thrown up.

A strong internal audit or quality and assurance function

within a company is essential for effective governance. The

internal auditors provide senior management, the Audit

Committee and the Board of Directors with assurance that

helps them fulfill their duties as board members. It would

appear that Luke Johnson did not have the support of such

a function at Patisserie Holdings.

Internal auditors are responsible for assisting in fraud

detection by examining and evaluating the adequacy and

effectiveness of the system of internal control in combating
potential risk/fraud.