A5 - Internal Control Communications Flashcards
An auditor’s letter issued on significant deficiencies relating to a nonissuer’s internal control observed during a financial statement audit should:
Indicate that the audit’s purpose was to report on the financial statements and not to provide an opinion on internal control
In reporting on a nonissuer’s internal control over financial reporting in an attest engagement (not an audit), a practitioner should include a paragraph that describes the:
Inherent limitations of any internal control.
Any report issued on significant deficiencies noted during an audit should:
1) indicate that the purpose of the audit was to report on the financial statements and not to provide assurance on internal control, 2) include the definition of significant deficiencies, and 3) include a restriction on the use of the report.
A material weakness is a deficiency, or combination of deficiencies, such that there is a ____________ possibility that a ________________ misstatement of the entity’s financial statements will not be prevented or detected/corrected.
Reasonable, material
In an audit of an issuer, the auditor is required to communicate both:
Significant deficiencies AND material weaknesses to management and the audit committee, but only material weaknesses result in an adverse opinion on the effectiveness of internal control.
In an attest engagement to examine the effectiveness of an entity’s internal control, the auditor must communicate:
Both significant deficiencies and material weakness to management and those charged with governance.
A previously communicated significant deficiency that has not been corrected ordinarily should be:
Communicated again in writing, during the current audit.
What is the auditor’s obligation to identify deficiencies in the design and operation of internal control in a financial statement audit of a nonissuer?
The auditor need NOT search for significant deficiencies in internal control but should document and communicate any such deficiencies that are discovered.
When reporting on conditions relating to an entity’s internal control observed during an audit of the financial statements of a nonissuer, the auditor should include a:
Restriction on the use of the report.
An engagement to express an opinion on the internal control of a nonissuer will generally:
Be more extensive in scope than the assessment of control risk made during a financial statement audit.
An entity-level control exists:
Independently of the audit
An auditor should issue an adverse opinion on the effectiveness of internal control when:
A material weakness exists.
