Week 5 - Internal Controls

Question 1

How does ISA315 define internal controls?

Answer 1

Not just a set of procedures and checks but a whole range of activities and attitudes

Question 2

What are the first 3 reasons companies need to maintain a sound system of internal control?

Answer 2

• to enable transactions to be properly authorised and recorded
• to produce reliable and timely management information
• to enable authorised access to, so as to safeguard, assets

Question 3

What are the next 3 reasons companies need to maintain a sound system of internal control?

Answer 3

• to deter and detect errors, fraud and theft
• to help manage risks the company may face
• to adhere to policies and plans

Question 4

What are the final 2 reasons companies need to maintain a sound system of internal control?

Answer 4

• to ensure legal requirements (e.g Companies Act) are met
• to meet regulatory requirements e.g CG Code

Question 5

Who is responsible for internal control?

Answer 5

The board should establish and maintain an effective risk management and internal control framework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives