1) Describe each of the three broad objectives management typically has for internal

control. With which of these objectives is the auditor primarily concerned?

The three objectives are:

• Reliability of financial reporting. Management has both a legal and professional
responsibility to be sure that the information is fairly presented in accordance with
reporting requirements such as U.S. GAAP and IFRS.
• Efficiency and effectiveness of operations. Controls within an organization are meant to
encourage efficient and effective use of its resources to optimize the company's goals.
• Compliance with laws and regulations. Public, non-public, and not-for-profit
organizations are required to follow many laws and regulations. Some relate to
accounting only indirectly, such as environmental protection and civil rights laws. Others
are closely related to accounting, such as income tax regulations and anti-fraud legal
provisions.
The auditor's focus in both the audit of financial statements and the audit of internal
controls is on the controls over the reliability of financial reporting plus those controls
over operations and compliance with laws and regulations that could materially affect
financial reporting.

2) Control activities help assure that the necessary actions are taken to address risks to
the achievement of the company's objectives. List the five types of control activities.
1. adequate separation of duties

2. proper authorization of transactions and activities

3. adequate documents and records

4. physical control over assets and records

5. independent checks on performance