chapter 6: gaining an understanding of the clients system on internal controls

Question 1

internal control

Answer 1

a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of the objectives related to operations, reporting, and compliance

Question 2

Three dimensions of internal controls

Answer 2

1. components
   2.objectives
2. organizational structure

Question 3

objective of internal controls

Answer 3

1. Operations objectives. These pertain to the effectiveness and efficiency of the entity’s operations, including operational and financial performance goals, and safeguarding assets against loss.
2. Reporting objectives. These pertain to internal and external financial and nonfinancial reporting and may encompass reliability, timeliness, transparency, or other terms as set forth by regulators, recognized standard setters, or the entity’s policies.
3. Compliance objectives. These pertain to adherence to laws and regulations to which the entity is subject.