Organisation control and audit Flashcards
Reasons why an internal control system can be ineffective
- Mistakes or poor judgement
- Collusion between staff - authoriser and processor fraud
- Management over ride - lack of authority from processor
- Coping with unusual situations - processes might only cope with routine
What is an advocacy threat?
Representing a client for 2 different services
What is a self interest threat?
Benefit you and not your client
What is an intimidation threat?
Forced
What is a familiarity threat?
Personal connections
What is a self review threat?
Reviewing your own work
When should auditors rotate?
5-7 years, recommended by governance
Why is auditor independence necessary?
- Auditors provide key quality control to financial information and therefore are trusted
- Value for money work - price for the work necessary and no discounts therefore not rushed
- A lack of independence may lead to a failure of professional standards
Compare duties and responsibilities of employee and professional accountant
- Obedience
> employee - duty of obedience to manager
> accountant - comply with ethical standards
established by ACCA (professional body) - Interests of employer and profession
> employee - responsible to promite the interests of
her employer (making money)
> accountant - honest and objective, not allowing
herself to be involved with misleading info - Obligations
> employee - fit in with organisation culture
> accountant - act within the standards of the
professional body
Importance of IA in a highly regulated industry
- Compliance - external requirements (loss of license or fines)
- Reputation
Why is the audit committee responsible for overseeing the IA function?
- Compliance requirements
- Independence
- Authority
How can effective internal controls provide assurance on the integrity of financial reporting?
Shareholders rely on effective internal controls as a basis for making their investments.
Timely, relevant and reliable information of FR. Controls to assist this
Segregation of duties
Staff have sufficient knowledge and competence
Detailed audit trails that can be followed by internal and external auditors
What is the role of the IA?
Independent appraisal function that examines and evaluates its functions.
Reviews of accounting systems, internal controls, risk management, compliance and value for money