ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is a major disadvantage of using narrative notes?

1. They can be easily computerized.

2. They may not provide a clear overview of internal controls.

3. They are quick to prepare.

4. They provide a comprehensive record of systems.

The correct answer is: They may not provide a clear overview of internal controls.

Narrative notes often lack the structured clarity that is required to provide a comprehensive overview of internal controls. While they can contain essential information about processes and procedures, their descriptive nature may not effectively summarize key control elements or highlight areas needing attention. Consequently, users may struggle to quickly identify weaknesses or understand the overall control environment just from narrative notes. In contrast to more structured documentation approaches, such as flowcharts or matrices, narrative notes can result in information that is overly verbose or lacking in visual clarity, making it harder for auditors and management to assess the effectiveness of internal controls at a glance. This limitation can hinder transparency and clarity for stakeholders who rely on this documentation for evaluations or decision-making. The other options may seem advantageous, but they do not address the fundamental issue of clarity that is critical for understanding internal controls effectively.