Professional Documents
Culture Documents
Internal Control in a
Financial Statement Audit
Objectives
Objectives
Objectives
Information and
Communication
Control Monitoring
Activities Activities
New accounting
Corporate pronouncements New business
restructuring International
models, products
growth
or activities
Controls are
assessed as Testing the
Controls do ineffective. effectiveness
not pertain to
of controls is
an assertion.
inefficient.
Obtain
Understanding of
Internal Control
Plan to Rely on
Internal Control and
Assess Control Risk
at a Lower Level
Acfn 723: Advanced Auditing/PLK
Assertions
Pinpoint the
Identify types of
factors that affect
potential
the risk of material
misstatements
misstatement
Design tests of
controls and
substantive
procedures
Excerpt from a
Questionnaire for
Documenting the
Auditor’s
Understanding of the
Control Environment
Procedure Manuals
and Organizational Flowcharts
Charts
Internal Control
Narrative Description
Questionnaires
Human Errors
or Mistakes
Collusion
Identify specific
controls that will
be relied upon.
Perform tests of
controls
Conclude on the
achieved level of
control risk.
Inspection of documents
Inquiry of appropriate indicating the
entity personnel performance of the
control
Interim
Year End
1. Control environment
2. Availability of information at a later date
3. The purpose of the substantive
procedure
Interim 4. The assessed risk of material
Substantive misstatement
Procedures 5. The nature of the transactions or
balances and relevant assertions
6. The ability of the auditor to perform
appropriate procedures to cover the
remaining period
Acfn 723: Advanced Auditing/PLK
Auditing Accounting Applications
Processed by Service Organizations
Type 1 Report
Describes the service organization's
controls and assesses whether they are
suitably designed to achieve specified
internal control objectives.
Type 2 Report
Goes further by providing assurance on
the operating effectiveness of the service
organization’s controls based on the
auditor’s tests of controls.
General Application
Controls Controls
Custom software:
(1) Is expensive to develop.
(2) Requires extended development time.
(3) May require extensive modification if
the entity changes its accounting
application programs.
Flowcharting Symbols