Internal Control

Question 0

Requirement

Answer 0

• Document the auditor’s understanding of entity’s internal control
• Obtain knowledge about design of the controls pertaining to internal control component
• communicate with management of internal control related matter in writing

Question 1

Components of internal control

Answer 1

Control environment 
Risk assessment 
Control activities
Information and communication 
Monitoring

Question 2

Required Procedure for every audit

Answer 2

Risk assessment procedures
Substantive procedures
Analytical procedures

Question 3

Test of control

Answer 3

• Must test operating effectiveness of internal control at least Every Third audit
• Are performed when they are likely to support a further reduction in assessed level of the risk of material misstatement

Question 4

Payroll

Answer 4

Payroll dept= record keeping

Distribution of payroll checks, custody of unclaimed pay checks＝treasurer

Question 5

Controller

Answer 5

• In control of record keeping function and fraud committed by controller is most difficult to detect
• write-off uncollectible accounts

Question 6

Significant deficiency & material weakness

Answer 6

Significant deficiency< Material
weakness - severe

• Auditor should separately identify and communicate significant deficiencies and material weakness.
• Material weakness should be reported separately from significant deficiencies.

-Distribution of auditor’s report in significant deficiencies is restricted to management and audit committee