The General Auditor’s Office (GAO) of ABC jurisdiction issued a report on the XYZ Electric Cooperative, a large member-owned utility. This report reviewed the work of MNO Consulting. MNO found numerous internal control weaknesses. The GAO concurred with MNO’s conclusion and recommendations regarding the overall lack of effective internal controls. In particular, the GAO went on to recommend that the ABC jurisdiction’s legislature should require by law that each cooperative:
• Create a board of directors (board) and maintain a separate audit committee.
• Employ an internal auditor who reports to the board. A reporter for the local newspaper has a couple of questions for you.
a. Typically, what is a governing board’s responsibility for internal controls?
b. Why would the GAO want each cooperative board to employ an internal auditor?