McDonald's Corporation is the largest food service organization in the world. The proper handling of cash and food is important to the profitability of McDonald's. Based on your personal knowledge of McDonald's and the internal control concepts and

Question

procedures described in the textbook, answer the following questions. REQUIRED: Most corporations, including McDonald's, include a Report of Management in their annual report. Describe, in general, the main elements that should be included in a Report of Management and give the purpose of this report.

Answer 1

A report of management would describe management's responsibility for the preparation and integrity of the financial statements. The report would indicate whether a staff of internal auditors evaluates the company's internal controls and employee compliance with such controls. Also, it would indicate that the company's independent auditors (CPAs) have audited the financial statements and rendered an opinion on the statements, after taking into consideration the internal controls and performing necessary tests required under generally accepted auditing standards. Finally, if the company has an audit committee, the role of the audit committee in carrying out the Board of Directors' oversight role would be explained. The purpose of a Report of Management is to tell the shareholders and other readers that management is directly responsible for both the integrity and consistency of all financial information presented in the annual report.