ITT IS3110

The success of a business is determined by how effective its managers are in managing risk. Therefore, acquiring effective risk management helps to protect the company from losses because of poor accounting practices as well as fraudulent activities. Using good controls protect managers from liabilities that may arise when certifying financial statements used in annual reports because when these reports are issued, they are also a reflection of the company’s internal controls. The internal control process begins with management and the attitude that management portrays through the company. Manager duties include implementing the policies and procedures used within the company, these policies and procedures are also used to build the structure which is found within the internal control environment.
An audit report has three general functions used to report a company’s financial statements. These reports indicate whether the financial statements are presented in conformity with generally accepted accounting principles. Auditors use their reports to highlight any unusual aspects of the audit examination, and the reports can be used to communicate useful information to decision makers that may not appear on the face of the financial statements. Internal reporting options are important in keeping regulators, investors, and employees informed, and the format should be understandable for managers and investors. Two options are available to the auditor for reports on the company’s financial statements and internal control over financial reporting. One option is to have two separate reports; the fairness of the company’s financial statements and the report on internal control over financial reporting. When using this option each report should refer to the basic responsibility and opinion expressed in the other report. If the second option is preferred in presenting the two reports, the reports should be combined. The combined report expresses an unqualified opinion on the