Documenting and Reporting on Internal Controls

Question 1

PCAOB audit Standard 4

Answer 1

Provides for an engagement in which the firm’s auditor is engaged to report on whether a previously reported IC weakness (adverse opinion) continues to exist. Has 4 stages
Plan the engagement
Obtain understanding of IC
Test and evaluate whether material weakness continues to exists
Form an opinion on whether a previously reported material weakness “continues to exists” or “no longer exists”

Question 2

ICQ Prepare

Answer 2

What cycle?
Key controls (ARCCS)
For each document
     PPN?
     Information on document?
     Send copies to whom?
Must always document understanding of IC (PRAISE)

Question 3

Documenting understanding of IC

Answer 3

ICQ
PRAISE
Physical Controls
Recording
Authorization
Independent Checks
Segregation of Duties
Evaluate Performance

Question 4

F/S IC Report Includes (non public)

Answer 4

Identify Significant deficiency & material weakness
Limited Use Statement (No general public b/c only looked at controls relied on)
Written Comm Req’d to Management Govn
w/I 60 days
Control Deficiency NO Mgt NO Govn
Significant Deficiency YES mgt YES Govn
Material Weakness YES Mgt YES Govn

Question 5

Attestation Engagement IC Report Includes (non public)

Answer 5

AICPA
EXAMINED in accordance with attestation standards by the AICPA
ALL Controls
Opinion —>Management’s Assertion is fairly stated
Inherent limitations (COCO) misstatements due to error or fraud may occur and not be detected
For GENERAL DISTRIBUTION
Control Deficiency YES Mgt NO Chrgd Governance
Significant Deficiency YES Mgt YES Chrgd
Material Weakness YES mgt YES Chrgd

Question 6

PCAOB IC Report Includes (Public)

Answer 6

AUDITED in accordance with standards of the PCAOB
ALL Controls
Opinion —>Mgt Maintained effective IC over financial reporting
Inherent Limitations (COCO) that IC may not prevent detect misstatements
For GENERAL DISTRBUTION
Control Deficiency YES Mgt NO Audit Com
Significant Deficiency YES Mgt No Audit Com
Material Weakness YES Mgt YES Audit Com

Question 7

PCAOB IC One or more material weakness

Answer 7

Adverse Opinion

Question 8

PCAOB IC Scope Limitation

Answer 8

Disclaim opinion or withdraw from engagement