Question

Which of the following is a valid statement related to the relationship of internal control using information technology and financial reporting risk?

a. Strong IT controls eliminate financial reporting risk
b. Weak IT controls increase financial reporting risk
c. IT controls have no impact on financial reporting risk
d. Financial reporting risk is independent of IT controls

Answer 1

Weak IT controls increase financial reporting risk by making financial information more susceptible to errors and unauthorized access, thus affecting the reliability of financial reporting.

Step-by-step explanation:

The relationship between internal control using information technology (IT) and financial reporting risk is that weak IT controls can indeed increase financial reporting risk. When IT controls are inadequate, there is a greater chance that financial information may be compromised, leading to unreliable financial reporting. This can include issues such as errors in data processing, unauthorized access to sensitive information, or failure to maintain data integrity. However, strong IT controls alone do not eliminate financial reporting risk as other factors outside of IT can affect financial reporting.