Week 9 - Seminar Notes Flashcards
What procedures are used to document systems?
- Speaking to relevant client staff
- Observing application of controls
- Walk through test - tracing a transaction through the system
- Inspecting documents
- Prior year files
What are ‘narrative notes’?
Written description of the system.
What are the advantages of ‘narrative notes’?
- Simple
- Easy to understand by audit staff
What are the disadvantages of ‘narrative notes’?
- Time consuming if complex system
- Hard to identify missing controls
What are ‘flow charts’?
A diagram of the system.
What are the advantages of ‘flow charts’?
- Easy to view entire system
- Easier to spot missing controls
What are the disadvantages of ‘flow charts’?
- Difficult to change
- Still need narrative notes
What is an ‘internal control questionnaire’?
A client is asked if they use common controls from a list.
What are the advantages of an ‘internal control questionnaire’?
- Quick to prepare
- Can ensure all controls are present
What are the disadvantages of an ‘internal control questionnaire’?
- Controls may be overstated
- Less common controls unlikely to be captured
What is an ‘Internal Control Evaluation’?
Client is given a list of risks and asked what controls they use to mitigate these risks.
What are the advantages of an ‘Internal Control Evaluation’?
- Controls less likely to be overstated
What are the disadvantages of an ‘Internal Control Evaluation’?
- Checklist may not be relevant to every client
- Less common risks unlikely to be captured
