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Understanding Internal Control. Obtaining an understanding of internal
control allows auditor's to identify the types of material ...
... in September of 1992. The COSO helps to emphasize the understanding of
a good internal control system. It provides guidelines for ...
... or small are the risk is, auditor could interview the managers, monitor the environment,
and get more understanding about how is manager’s internal control. ...
... The objective setting component references the understanding and expressing of a ...
With the internal control, ERM, COSO concepts understood the company must use ...
... enhanced managements' and employees' appreciation, understanding, and accountability ...
1] identification of internal control deficiencies and implementation of ...
Submitted by egig4soc19 on March 27, 2007
Category: Business
Words: 656 | Pages: 3
Views: 379
Popularity Rank: 27,630
Average Member Grade: N/A (Add a Comment / Grade this Paper)
Obtaining an understanding of internal control allows auditor's to identify the types of material misstatements that could occur in the financial statements, consider the factors that affect the risk of material misstatements, and design substantive tests. An auditor obtains the understanding from researching the clients business. An auditor will take inquires from management and personnel, observe client activities and operations, walk-through the business, and inspect client documents and records. Gathering that information and understanding it will help the auditor plan the audit. The purpose of obtaining an understanding of internal controls allows the auditor to both assess control risk and then detection risk, and determine the nature, extent and timing of substantive tests.
When assessing the control risk below the maximum level the auditor will need to identify the controls (polices and procedures) that affects a financial statement assertion. There can be a pervasive effect on many assertions, or a specific effect on an individual assertion. Next, the auditor will evaluate how effectively the controls prevent or detect material misstatements in that assertion. He or she needs to test the controls to determine how the procedure is designed and how it operates. When an auditor determines a control risk at below the maximum level documentation is required. They need tests of control, results of the tests, and the auditor's evaluation of the effectiveness of the controls. They also need the evidential matter that is sufficient to support a specific assessed level of control risk. Evidential matter varies substantially in the assurance it provides to the auditor as he or she develops an assessed level of control risk. The type of evidential matter, its source, its timeliness, and the existence of other evidential matter related to the conclusion to which it leads all bear on the degree of assurance evidential matter provides. These...
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