Certified Building Official Management Practice Exam

What is the name of the report that provides recommendations on internal controls and accounting procedures?

1. Audit summary

2. Management letter

3. Financial statement

4. Compliance report

The correct answer is: Management letter

The correct answer is the management letter. This document is typically issued by an external auditor after conducting an audit of a company's financial statements. It contains the auditor's recommendations regarding internal controls, accounting policies, and procedures that the organization can implement to enhance its financial reporting and compliance with applicable standards and regulations. The management letter also serves to communicate any weaknesses identified during the audit and suggestions for improvement. This feedback can be crucial for management to address areas of risk and strengthen overall governance. In contrast, an audit summary generally provides a brief review of the audit findings without detailed guidance on internal controls. A financial statement presents a formal record of the financial activities and position of a business, but does not include recommendations. The compliance report focus on adherence to regulations and laws rather than internal controls and accounting processes. Thus, the management letter is specifically designed to provide actionable recommendations that help organizations improve their operational and financial practices.