Internal Control Audit Standards
Jurgen Skembi
Homework5
Internal Control Audit Standards
a. For what purposes should an auditors’ understanding of the internal control components be used in planning an audit?
An auditors’ understanding of the internal control components should be used for 3 reasons:
a) To identify the potential misstatement that might occurs
b) To identify the factors that affect the risk of material misstatement
c) To influence the design of substantive procedures
b. What is required for an audit team to assess control risk below the maximum level?
It is required for an audit team to assess control risk below the maximum level to identify specific control procedures and policies relevant to specific assertions that will detect and prevent material misstatement regarding those assertions. It is required also to perform control tests in order to evaluate the operating patterns and effectiveness of the internal control procedures.
c. What should an audit team consider when seeking to reduce the planned assessed level of control risk below the maximum?
An audit team should consider mainly two things:
a) If additional audit evidence is available to support further reductions in the planned assessed level of control risk
b) If it would be efficient to perform additional control test in order to obtain the necessary audit evidence
d. What are the documentation requirements concerning a client’s internal control components and the assessed level of control risk?
An auditor should document firstly the understanding of the client’s internal control system audits and also he should document the basis for the conclusion about the assessed level of control risk.
If assessed level of risk is at the maximum level, the auditor should document the conclusion and the reasons leading at it. On the other hand, if the assessed level of risk is below the maximum level, what the auditor should do is to document the basis for the conclusion
Homework5
Internal Control Audit Standards
a. For what purposes should an auditors’ understanding of the internal control components be used in planning an audit?
An auditors’ understanding of the internal control components should be used for 3 reasons:
a) To identify the potential misstatement that might occurs
b) To identify the factors that affect the risk of material misstatement
c) To influence the design of substantive procedures
b. What is required for an audit team to assess control risk below the maximum level?
It is required for an audit team to assess control risk below the maximum level to identify specific control procedures and policies relevant to specific assertions that will detect and prevent material misstatement regarding those assertions. It is required also to perform control tests in order to evaluate the operating patterns and effectiveness of the internal control procedures.
c. What should an audit team consider when seeking to reduce the planned assessed level of control risk below the maximum?
An audit team should consider mainly two things:
a) If additional audit evidence is available to support further reductions in the planned assessed level of control risk
b) If it would be efficient to perform additional control test in order to obtain the necessary audit evidence
d. What are the documentation requirements concerning a client’s internal control components and the assessed level of control risk?
An auditor should document firstly the understanding of the client’s internal control system audits and also he should document the basis for the conclusion about the assessed level of control risk.
If assessed level of risk is at the maximum level, the auditor should document the conclusion and the reasons leading at it. On the other hand, if the assessed level of risk is below the maximum level, what the auditor should do is to document the basis for the conclusion