Professional Documents
Culture Documents
Internal Controls
Internal Controls
4.
4.
Physical controls
5. Segregation of duties
Custody
characteristics Authorization
1. A process Recording
2. Effected by entity`s personnel
3. Reasonable assurance of achieving entity`s Monitoring of controls
objectives “assessment and improvement of internal controls”
inherent limitations: accomplished thru OST
a. Cost-benefit consideration a. ongoing monitoring activities
b. mgt Overriding control b. separate evaluations
c. Collusion c. combination of the two
d. Human error
e. directed at Anticipated types other concepts
4. Geared toward attainment of entity`s entity-wide controls and transaction controls
objectives Entity wide controls Controls on mgt override
a. Financial: reliability of financial reporting risk assessment process
b. Operational: effectiveness and efficiency of monitoring of results of
operations
operations financial closing and
c. Compliance: compliance with applicable reporting controls
laws and regulations risk management policies
documentation
a. discussion of significant decision reached
b. key elements of understanding obtained
c. identified and assessed ROMM at fs and
assertion level
d. risk identified
specific procedures
Inquiry
Observation
Inspection; and
Reperformance
Recurring audit
a. there have been changes, test the controls
in current audit
b. have not been such changes, test the
controls at least once in every third audit
documentation
Understanding Basis for the
Control risk Control risk
of internal control risk
assessment assessment
control assessment
High Yes Yes No
Less than
Yes Yes Yes
high
communication
Deficiency in Control unable to Determine
internal control prevent, or detect whether
and correct individually or in
misstatements combination
constitute
significant
deficiencies