Over the course of Young & Young’s audit of SQL Group, a publicly traded company, Young & Young concluded that SQL’s financial statements presented fairly according to U.S. GAAP, but its internal controls over financial reporting were not effective as of the audit date. Management’s initial evaluation was that the ICFR is effective. This is the first time anything like this has happened to management and they are not sure what to do.
(a) Who is responsible for the ensuring that SQL’s internal controls over financial reporting are effective?
(b) Can SQL’s management do anything to alter Young & Young’s opinion concerning the effectiveness of its internal controls over financial reporting? How should Young & Young respond to any such pressures?
(c) Can Young & Young require management to change its report on ICFReffectiveness?