Nick's Steakhouse and Pizza, described in the opening feature story of this chapter, is a privately held familyrun restaurant located in Calgary. The Imvescor Restaurant Group Inc. is a Canadian public company that operates more than 250 Pizza Delight, Mikes, Scores, and Bâton Rouge family restaurants across Canada.
Since Nick's and Imvescor are in the same industry, they have much in common. However, they are also very different. For instance, Nick's is an owner-operated single location, whereas Imvescor has multiple locations and multiple franchise owners. In addition, Nick's is a private company that follows ASPE while Imvescor is a public company that follows IFRS.
Instructions
(a) Do you think that, when a company chooses a particular set of accounting standards to use, this has any impact on its internal controls? If so, how?
(b) Because Imvescor is a public company, management is required to perform an annual in-depth evaluation of the company's internal controls over financial reporting. Imvescor must state in its annual report that the evaluation was performed and state the CEO's and CFO's conclusion on the effectiveness of internal controls. If there were any material weaknesses, this must be reported, along with how management plans to fix these weaknesses. Why do you think public companies are required to report on the effectiveness of their internal controls?